Crude oil prices extended their climb that began Monday as concerns about supply security deepened.
At the time of writing, Brent crude was trading at $64.85 per barrel and West Texas Intermediate was changing hands for $62.82 per barrel, after rising by about 3% on Monday, per Reuters.
The benchmarks reacted to the latest escalation between Russia and Ukraine, which many seem to expect to spread to Russian oil targets, and to a report saying Iran was about to reject a U.S. proposal for a nuclear deal that would require Tehran to stop any uranium enrichment activities.
“Iran is drafting a negative response to the U.S. proposal, which could be interpreted as a rejection of the U.S. offer,” an unnamed source that Reuters described as a senior diplomat close to the Iranian negotiating team, was quoted as saying.
If confirmed, this development would essentially mean a dead end for the negotiations, no deal, and continued U.S. sanctions on Iran’s oil industry, which would in turn mean continued restrictions of supply from that OPEC member, with China remaining the only one to benefit from discounted Iranian crude.
Elsewhere, wildfires in Alberta have shut down close to 350,000 barrels daily in production, which is equal to around 7% of the province’s total but enough to add fuel to the oil price rally.
The OPEC+ production update news itself also acted as catalyst for higher prices, it seems. The reason was that many expected an even bigger output hike and when it did not materialize, relief caused bullishness.
“With the worst fears not panning out, investors unwound their bearish positions they had built prior to the weekend’s meeting,” ANZ senior commodity strategist Daniel Hynes wrote in a note cited by Reuters.
A further bullish factor for oil was the weaker greenback, Bloomberg noted in a report on the latest price developments in commodity markets. Wall Street expects the U.S. dollar to weaken further.
By Irina Slav for Oilprice.com
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