Oil prices rose by nearly 2 per cent on Tuesday over persistent geopolitical tensions between Russia and Ukraine, as well as the United States and Iran, with Brent crude futures grew by $1 or 1.5 per cent to settle at $65.63 a barrel and the US West Texas Intermediate (WTI) crude futures increasing by 89 cents or 1.4 per cent to close at $63.41 per barrel.
Russia said work on trying to reach a settlement to end the war in Ukraine was extraordinarily complex and that it would be wrong to expect any imminent decisions.
The country was waiting for Ukraine’s reaction to its proposals.
Russia is a member of the Organization of the Petroleum Exporting Countries and allies, (OPEC+) that includes and was the world’s second biggest producer of crude in 2024 behind only the US.
OPEC member Iran, meanwhile, was set to reject a US nuclear deal proposal that would be key to easing sanctions on the major oil producer.
Iran was the third biggest producer of crude in OPEC behind Saudi Arabia and Iraq in 2024
The US may then keep sanctions on both OPEC+ members in place for longer, there by lending support to the oil market.
Market analysts noted that risk premium that has ramped up this week as the prospect of a Russia/Ukraine ceasefire as well as an Iranian nuclear deal now appear to have been pushed back.
Further support comes as wildfires burning in Alberta, Canada, have affected more than 344,000 barrels per day of oil sands production, or about 7 per cent of the country’s overall crude output.
Canada produces about 4.9 million barrels of oil per day.
On the economic front, inflation in Europe eased below the European Central Bank’s (ECB) target last month on surprisingly benign services costs, underpinning expectations for further policy easing.
Central banks like the ECB use interest rates to keep inflation in check. Lower interest rates can spur economic growth and demand for oil by reducing consumer borrowing costs.
The Organisation for Economic Co-operation and Development (OECD) revised down its forecast for global economic growth as the fallout from US President Donald Trump’s trade war takes a bigger toll on the US economy.
Meanwhile in the US, the government has asked countries to make their best offers on trade negotiations by Wednesday as US officials ramp up efforts to deliver multiple agreements to President Trump before a self-imposed deadline just five weeks away.
Crude oil inventories in the US fell again, this time by 3.3 million barrels in the week ending May 30.