Crude oil futures saw an increase on the first day of the second quarter of trading, with the West Texas Intermediate contract and the Brent contract both rising. The West Texas Intermediate contract for May delivery rose by 0.65% to settle at $83.71 a barrel, while the Brent contract for June delivery added 0.48% to settle at $87.42 a barrel. This increase was attributed to reports of an Israeli missile strike hitting the Iranian consulate in Damascus, Syria, which resulted in the death of a senior commander in Iran’s Revolutionary Guard, Mohammad Reza Zahedi.
The geopolitical tensions in the Middle East, specifically the missile strike in Damascus, have caused concerns of a potential escalation of conflict in the region, leading to a bolstering of near-term oil prices. Analysts, such as Leo Mariani from Roth MKM, have pointed to this event as a contributing factor to the rise in oil prices. Additionally, there are ongoing geopolitical risks in the market, such as Ukraine striking Russian oil refineries and Houthi militant attacks in the Red Sea, which have resulted in the diversion of crude deliveries around the Cape of Good Hope in southern Africa.
In addition to the geopolitical factors driving oil prices higher, there is also an expectation of strong global demand for oil. OPEC+ has chosen to hold barrels off the market at least through the second quarter, which has further supported the increase in oil prices. This expectation of strong global demand has been a contributing factor to the consecutive months of gains for both U.S. crude and Brent oil futures.
As of 2024, both U.S. crude and Brent oil futures have experienced three consecutive months of gains. WTI has seen a 17.8% increase for the year, while Brent has risen by 14.2%. This sustained increase in oil prices is attributed to a combination of geopolitical tensions in the Middle East, expectations of strong global demand, and the strategic decision by OPEC+ to limit the supply of oil on the market. These factors have come together to drive the upward trend in oil prices in the second quarter of the year.
