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Crude oil futures posted back-to-back session gains to settle at their highest level in seven weeks on Tuesday, as geopolitics returned to influence the markets with a resurgence in ship attacks in the Red Sea and Ukrainian drone attacks on Russian oil and energy infrastructure.
Prices rose after a Ukrainian drone strike caused a large fire in a fuel tank at an oil terminal in Russia’s southern port of Azov, and Yemen’s Houthi militants are believed to have sunk a second ship in the Red Sea.
Additionally, Israeli Foreign Minister Israel Katz warned a decision on an all-out war with Hezbollah is coming soon even as U.S. diplomacy tries to avert a greater war.
“Everywhere you look the geopolitical risk factor is very high,” Price Futures Group’s Phil Flynn said, according to Reuters. “We have not seen a major impact on supply but that could change really quickly.”
Front-month Nymex crude (CL1:COM) for July delivery ended +1.5% to $81.57/bbl, and front-month August Brent crude (CO1:COM) closed +1.3% to $85.33/bbl, the highest since April 30 for both benchmarks.
U.S natural gas bounced after four straight sessions of losses, as front-month Nymex July natgas (NG1:COM) settled +4.3% to $2.909/MMBtu.
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U.S. shale drillers will increase their oil production for another 3-4 years before stalling around 2028, which would thwart OPEC+ hopes for a quicker drop in U.S. output growth, according to a new analysis from HSBC.
Improvements in drilling and fracking techniques will drive the expansion and more than offset recent reductions in rig deployments, analysts at the bank wrote in a note titled “Underestimate U.S. Shale at Your Peril.”
U.S. shale fields will raise production by ~400K bbl/day in the next year, followed by slower growth, according to the report.