A day after going down, oil prices are back on the upswing after global tensions continue to spook the market. Concerns over supply disruptions surfaced again as conflict looms in Eastern Europe and the Middle East.
Oil Prices Climb As Global Tensions Continue
A day after oil prices eased up a bit, they rose up again. Brent crude futures went up by 48 or 0.6% to close at $86.75 a barrel. This dented the decrease of 1.8% during the previous trading day.
Meanwhile, US West Texas Intermediate went up by 34 cents (0.4%) to end up at $83.65 a barrel. Previously, WTI prices fell by 2.2%.
The rise of oil prices was a result of renewed jitters over global tensions in Europe and the Middle. Many buyers panicked over the potential tightening of supplies once conflict erupts in either or both theaters.
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Oil Prices Hit 7-Year Highs Last Week
Last week, oil prices hit seven-year highs as tight supplies amid increasing demand went into play. Chiyoki Chen, the chief analyst at Sunward Trading, said that “the market tone stays strong, supported by heightening geopolitical risk.”
Chen noted that many investors began profit-taking when oil prices moved higher. At the same time, there are concerns over the US Federal Reserve’s policy to reduce economic stimulus.
As a result, “buying appetite for oil remained solid,” he said. Aside from oil prices, the stock market also tumbled worldwide as global tensions continue to flare up.
Global Tensions: Eastern Europe Chapter
Yesterday, NATO announced that it ordered its forces on standby. The defense treaty group also said that it will deploy more ships and warplanes in Eastern Europe.
Meanwhile, Russia, Ukraine’s neighbor, denounced what it called “Western hysteria,” even as it massed its own troops on the border.
The US, reacting to growing tensions in Ukraine, also put its armed forces on standby. It also issued an updated travel advisory for Americans currently in Ukraine.
The US Embassy in Kyiv will now start bringing non-essential personnel back to American soil. It will also start flying families of its staff home.
The State Department also warned Americans in Ukraine to consider preparing to move out while commercial flights are available. The government said that it will not launch an evacuation as it did in Afghanistan last year.
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Global Tensions: Middle East
Meanwhile, in the Middle East, the Iran-backed Houthi movement in Yemen launched a missile attack at the United Arab Emirates yesterday. The attack targeted a military base hosting US troops.
However, US-built Patriot Interceptors managed to repel the attack, according to the US and Emirati officers. The UAE reported no casualties for the latest incursion, but it did scatter shards across the country.
Last week, the Houthis also launched an attack at the UAE airport in Abu Dhabi. The group launched cruise missiles and ballistic missiles alongside drones. The strike killed three civilians working at the airport.
Biden Needs To Bring Oil Prices Down
As oil prices trend upwards to $100 per barrel, analysts are calling for President Joe Biden to act now. A prolonged oil price increase can damage the US economy long term.
Simon Watkins, a financial journalist, and author said that the increases have a ripple effect. Every $10 increase in oil prices leads to a 20 to 30 cents hike in the price of gasoline.
A single cent rise in the price of gasoline adds more than $1 billion in discretionary consumer spending for Americans.
Watch the Yahoo! Finance news video where a strategist says that Geopolitical risks are elevating oil prices a little bit more:
What do you think about rising oil prices yet again? Will the US economy remain hostage to global tensions even as it deals with internal problems? Do you see any relief in sight for the American consumer?
Let us know what you think. Share your thoughts below.