Oil rises as heightened geopolitical risks exacerbate supply concerns

© Reuters. A state controlled oil refinery Lotos is pictured in Gdansk, Poland June 6, 2022. Picture taken June 6, 2022. REUTERS/Kacper Pempel

By Yuka Obayashi

TOKYO (Reuters) – Oil prices rose in early Asian trading on Monday on concerns over tighter global supply brought about by escalating conflicts in the Middle East and between Russia and Ukraine, while a shrinking U.S. rig count added to upward price pressure.

Brent crude futures climbed 52 cents, or 0.6%, to $85.95 a barrel at 0359 GMT. U.S. crude futures gained 55 cents, or 0.7%, to $81.18 per barrel.

Both benchmarks fell less than 1% last week versus the previous week. A stronger U.S. dollar, which rose about 1% over the last week, has kept a lid on prices.

“Escalating geopolitical tension, coupled with a rise in attacks on energy facilities in Russia and Ukraine, alongside receding ceasefire hopes in the Middle East, raised concern over global oil supply,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan (OTC:NSANY) Securities.

Meanwhile, the U.S. oil rig count fell by one to 509 last week, showed data from energy services firm Baker Hughes, indicating lower future supply.

Moscow launched 57 missiles and drones in the attack that also targeted the capital Kyiv, two days after the largest aerial bombardment of Ukraine’s energy system in more than two years of full-scale war, Kyiv said.

The move followed Ukraine’s recent attacks on Russian oil infrastructure, with at least seven refineries targeted by drones just this month.

“Disruptions to oil refineries in Russia have added pressure on fuel markets, leading to rising demand for available crude oil cargoes,” analysts at ANZ Research said, adding that about 12% of Russia’s total oil processing capacity was impacted.

Indian refineries refusing to take Russian crude carried on PJSC Sovcomflot tankers due to U.S. sanctions was also adding to global market tightness, ANZ said.

In the Middle East, Israeli forces besieged two more Gaza hospitals on Sunday, pinning down medical teams under heavy gunfire, the Palestinian Red Crescent said. Israel said it had captured 480 militants in continued clashes at Gaza’s main Al Shifa hospital.

U.S. Secretary of State Antony Blinken told Israeli Prime Minister Benjamin Netanyahu on Friday that Israel risked global isolation if it attacks the Palestinian city of Rafah in the Gaza Strip.

Elsewhere in the Middle East, U.S. forces engaged six Houthi unmanned aerial vehicles over the southern Red Sea after the group launched four anti-ship ballistic missiles toward a Chinese-owned oil tanker, U.S. Central Command said on Saturday.