Geopolitical risks climb, international oil prices continue to rally

International oil prices continued their gains 21st, influenced by rising geopolitical risks.

The prices of light crude oil futures delivered by the New York Mercantile Exchange in June rose by $0.31 trillion to $63.41 per barrel; London Brent crude oil futures, delivered in July, rose 0.23 dollars and closed at $72.2 per barrel, all at a high since late April.

Analysts say the energy market supply side will continue to tighten if security risks persist in the Middle East. In recent times, U.S.-Iran relations have continued to be tense. Earlier this month, the United States announced that it would no longer grant sanctions exemptions to imports of Iranian oil from some countries and regions to ban Iranian oil exports across the country, and then announced sanctions against Iran’s steel, aluminium and copper industries. In addition, the United States announced the deployment to the Middle East of the “Abraham Lincoln” carrier Battle Group, B-52 strategic bombers and dockyard transport ships to deal with the “Iranian threat.”

Iran’s crude oil exports reportedly fell to 500,000 barrels a day in May. In response, Iran threatened to close Hormuz, Str. Of.

Hormuz, Str. Of is the only way for crude oil exports from Middle Eastern oil producers such as Saudi Arabia, Iraq, Qatar and the United Arab Emirates, and about one-third of the world’s seaborne oil trade depends on it. OPEC’s attitude to extending production cuts also supports oil price expectations.

OPEC said the implementation rate of the agreement on production cuts between OPEC and partner countries in April was as high as 168%, and the implementation rate of the agreement to cut production in January-April was 120% this year.

According to data provided by OPEC, oil inventories in developed economies rose 3.3 million barrels a year in March, and oil stocks levels were 22.8 million barrels higher than the average of nearly five years.

Saudi Energy Secretary Falih said 19th that OPEC’s consensus with non-OPEC partners is to reduce crude oil inventories, but will still respond to fragile market supply and demand.

The market believes OPEC still tends to maintain production cuts in the second half of the year, with international oil prices supported to some extent.

The outlook for oil consumption is worsening as downside risks increase in the global economy and growth prospects in a number of major emerging markets, including Brazil, India and Turkey, are in doubt.

The MSCI Ming Sheng Emerging Markets index is down 9% from a year earlier and, while down from a 17% drop at the end of December, remains the worst performance since the commodities plummeted from 2015 to 2016. Brazil lowered its economic growth forecast, and the country’s economy may have shrunk in the first quarter. Argentina’s inflation rate is accelerating, and the International Monetary Fund expects its economy to shrink this year.

India’s economy is also losing momentum. Market participants expect oil consumption growth to slow this year against a backdrop of slowing global economic growth, with oil prices lacking momentum to rise.