Crude oil prices were trading up nearly 4% on Monday afternoon, with analysts attributing the spike to escalating geopolitical tensions, and the aftermath of a massive Ukrainian drone strike on four Russian military airports overnight.
Overnight, Ukrainian drone attacks targeted Russia’s Kursk and Voronezh regions, igniting fires in residential buildings, causing significant disruptions to highway traffic and reportedly destroying over 40 aircraft in the process. Russian defense officials reported intercepting a total of 162 drones, with 57 downed over the Kursk region alone. These strikes are part of a broader Ukrainian strategy to exert pressure deep within Russian territory.
On Monday, June 2, at 12:47 p.m. ET, Brent crude was trading up 3.78% to $65.15 per barrel and West Texas Intermediate (WTI) was trading up 3.92% to $63.17 per barrel.
Earlier on Monday, Goldman Sachs said it expected OPEC+ to make its final production hike in August, again of 411,000 bpd, noting that the “expected demand slowdown is unlikely to be sharp enough to stop raising production when deciding on August production levels on July 6th”.
Goldman’s statement follows the announcement on Saturday that OPEC+ will boost production by 411,000 bpd for July, following suit from May and June.
“The market is reacting to the dual impact of geopolitical instability and OPEC+’s cautious approach to increasing supply,” ING analysts noted. “These factors are combining to drive prices higher.”
“While President Trump appears to be increasingly frustrated with President Putin, he’s so far been reluctant to impose additional sanctions. Actions that successfully target Russian oil flows will change the outlook for the oil market drastically,” according to the ING note to clients.
Morgan Stanley also expects OPEC+ to make three more consecutive monthly output increases, effectively bringing 2.2 million bpd (not accounting for chronic over production from those who have not been adhering to the OPEC protocol) back to the market.
By Charles Kennedy for Oilprice.com
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