West Texas Intermediate (WTI) trades around $103.20 at the time of writing on Tuesday, up 1.16% on the day and extending its advance for a fourth consecutive day. Oil prices remain supported despite signs of temporary easing in Middle East tensions, with markets continuing to price in a geopolitical risk premium linked to potential supply disruptions.
Crude prices could nevertheless limit their upside after US President Donald Trump announced on Monday a pause on a planned US military attack against Iran. According to reports, the decision followed appeals from leaders of Qatar, Saudi Arabia and the United Arab Emirates (UAE) for regional de-escalation.
Donald Trump noted that serious negotiations with Tehran are currently underway, while warning that the United States (US) remains prepared to launch a large-scale military operation if discussions fail. This stance continues to keep energy markets on edge, as tensions between Washington and Tehran have fueled a sharp rise in prices in recent days.
Concerns surrounding the Strait of Hormuz also continue to support the market. This strategic waterway remains a key route for global Oil flows, while Iran’s nuclear program and sanctions continue to represent major obstacles to a lasting agreement.
On the demand side, India announced an increase in petrol and diesel prices by 87 and 91 paise per litre, respectively, in an effort to offset losses caused by rising global Crude costs. As the world’s third-largest Oil importer, developments in Indian demand are closely monitored by investors.
Comments from banks continue to highlight longer-term downside risks. Rabobank believes that increased fragmentation within the Oil market could weigh on prices in the coming years, particularly following the United Arab Emirates’ exit from the Organization of the Petroleum Exporting Countries (OPEC). Meanwhile, ING notes that the market remains extremely sensitive to headlines related to Iran and risks surrounding global supply.
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