Oil Prices Jump 2% to Two-Week High Amid Lingering Geopolitical Tensions
Oil prices rose around 2% on Tuesday, reaching their highest levels in two weeks, as ongoing geopolitical tensions involving Russia, Ukraine, the U.S., and Iran suggested that sanctions on both Russia and Iran—major OPEC+ oil producers—will likely remain in place for the foreseeable future.
Brent crude futures settled $1 higher at $65.63 a barrel, up 1.5%, while U.S. West Texas Intermediate (WTI) crude ended the day at $63.41, climbing 89 cents or 1.4%.
Analysts at Ritterbusch and Associates noted that the “risk premium” in oil markets increased significantly this week as hopes for a near-term Russia-Ukraine ceasefire or a breakthrough in the U.S.-Iran nuclear deal have faded, with both issues possibly stalled for weeks or longer.
Moscow acknowledged that peace negotiations with Ukraine were extremely difficult, adding that no quick resolution should be expected while it awaits a response from Kyiv.
Russia, a leading OPEC+ member, ranked as the world’s second-largest oil producer in 2024, trailing only the United States, according to U.S. energy data. Iran, also an OPEC member, was the third-largest producer in the group, behind Saudi Arabia and Iraq.
Iran is poised to reject a recent U.S. proposal aimed at resolving the nuclear standoff, which would be essential to lifting sanctions that have hampered its oil exports.
Meanwhile, wildfires in Alberta, Canada, have disrupted over 344,000 barrels per day of oil sands output—about 7% of the nation’s total production, based on Reuters estimates.
Demand Outlook and Inflation Signals
In Europe, inflation in the eurozone fell below the European Central Bank’s 2% target in May, largely due to softer services prices, fueling speculation that further interest rate cuts may be on the horizon. Lower rates could stimulate economic growth and increase oil demand by making borrowing cheaper.
However, in the U.S., Chicago Fed President Austan Goolsbee warned that inflation from Trump’s import tariffs could materialize quickly, although a slowdown in economic activity might take longer to emerge.
The OECD cut its global growth forecast, citing rising pressure from Trump’s tariff policies, which are increasingly impacting the U.S. economy. Signs of weakness in the labor market emerged as job openings rose in April, but layoffs surged—marking the largest increase in nine months.
To accelerate trade negotiations, the U.S. has asked its partners to submit their best offers by Wednesday, aiming to finalize several trade agreements before a self-imposed deadline in five weeks.
U.S. Oil Inventories Expected to Decline
Analysts predict U.S. crude inventories dropped by about 1 million barrels last week, marking the second consecutive weekly draw. This compares to a 1.2 million barrel build during the same period last year and a five-year average draw of 2.3 million barrels.
The American Petroleum Institute (API) and the Energy Information Administration (EIA) are scheduled to release official inventory data on Tuesday and Wednesday, respectively.
