Geopolitical concerns over oil continue

Oil held on to gains after a new round of U.S. and British offensives against Iran-backed Houthi rebels in Yemen raised tensions in the Middle East and eased concerns about ample global supplies. Global benchmark Brent was steady around $80 a barrel after rising almost 2% on Monday, while U.S. crude was below $75. U.S. and British forces launched their latest offensive on eight Houthi targets in a bid to prevent the group from attacking merchant ships in the Red Sea. Crude ended the week higher after reports that Ukrainian drone strikes on energy facilities on Russia’s Baltic coast opened a new front in the conflict between the countries almost two years after Moscow invaded. Despite a host of geopolitical tensions and a pledge by the Organization of the Petroleum Exporting Countries to rein in output, crude has struggled to establish a clear direction this year. Oil’s gains were offset by signs of ample non-OPEC production, with the International Energy Agency forecasting ample supplies. It has also restarted flows from its biggest field after being stopped in Libya, and U.S. drillers are trying to shake off the effects of a freeze that has crippled operations. “The attack in Russia is a significant reminder of the ongoing conflict in two key energy-producing regions,” said Robert Rennie, head of commodities and carbon research at Westpac Banking Corp. Oil inventories are set to shrink further after U.S. production was hit by a severe downturn. Weather and OPEC+ cuts are coming into play, but the return of supply from Libya’s Sharara field should help ease some of the tension, Rennie added.