Oil Prices are on the Rise—What’s Driving the Surge?
Early this week, oil bumped past the 1% mark. Trading opened Wednesday with barrels priced at $80.74—just a touch above the $80.73 support level that kept the market from sliding.
Why the Prices Keep Climbing
- Supply Crunch – Russia is in trouble. Sanctions, Ukrainian drone attacks on refineries, and storage cuts are tightening the oil supply.
- Demand Pulse – The Fed’s plan to cut rates three times this year, along with European rate cuts, could kick global demand up a notch.
- Market Skepticism – Even though the Fed is vocal about rate cuts, traders remain cautious. The upcoming PCE inflation release on Friday might stir the pot if inflation stays stubborn.
- Production Drops – Oil output fell to 13.1 million barrels per day after a February high of 13.3. Downward pressure on supply usually nudges prices up.
Geopolitical Tensions Adding Fuel to the Fire
- Ukraine’s drone strikes target Russian refineries, shutting down roughly 900,000 barrels per day.
- In the Red Sea, shipping rerouting to dodge Yemeni Houthi attacks has piled about 100 million barrels of oil into international waters.
- These disruptions mean less supply on the grid, but they also interact with reduced Chinese demand and uncertain Russian exports.
Price Outlook: The $90 Threshold
Oil could crest around $90 per barrel, but until it does, increases may be gradual. A jump could catch central banks’ eyes—price shifts influence future policy through consumer price data slated for later this week.
What’s Next? Keeping an Eye on the Dollar and Geopolitical Moves
- US economic data will remain the yardstick for monetary policy and the strength of the dollar.
- Any progress in Gaza ceasefire talks could soothe market nerves.
- Investor risk appetite, churny as it might get, can still sway prices.
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