By Adedapo Adesanya
Oil prices rose about 1 per cent on Monday, spurred by the prospect of strong summer driving demand and as tensions in the Middle East and drone attacks on Russian refineries led to concerns about supply.
Brent futures settled at $86.01 a barrel after gaining 77 cents or 0.9 per cent and the US West Texas Intermediate (WTI) crude traded at $81.63 a barrel after appreciating by 90 cents or 1.1 per cent.
Both benchmarks grew about 3 per cent last week for their second consecutive weekly upswing.
Market analysts note that this came from the growing confidence that global oil inventories will inevitably plunge during the summer in the northern hemisphere as demand improves.
Geopolitical risks in the Middle East and an increase in Ukrainian drone attacks on Russian refineries also underpinned oil prices.
Meanwhile, European Union countries on Monday agreed on a new package of sanctions against Russia over its war in Ukraine, including a ban on reloading Russian liquefied natural gas (LNG) in the EU for further shipment to third countries.
An easing US Dollar also added support for the oil as a cheaper greenback makes dollar-denominated commodities such as oil more attractive to buyers using other currencies.
The Dollar weakened from a nearly eight-week high as traders went back on alert for intervention to support the Yen after the Japanese currency neared the 160 per Dollar level.
The Dollar index, measuring performance against six major currencies, had climbed on Friday and was up slightly on Monday after data showed US business activity at a 26-month high in June.
S&P Global said on Friday that its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors in the world’s largest oil consumer, nudged up to 54.6 this month to the highest level since April 2022 and followed a final reading of 54.5 in May.
After last week’s big decline in US crude and gasoline (fuel) inventories, traders are waiting to see whether the report due on Wednesday will provide further evidence of sustained strong gasoline demand.
In Ecuador, state oil company Petroecuador has declared force majeure on deliveries of Napo heavy crude for export after the shutdown of a pipeline and oil wells owing to heavy rain. A force majeure clause prevents a party from fulfilling their contractual obligations due to unforeseen circumstances.