Brent crude stays above $100 as Middle East tensions offset G7 supply boost
Brent crude oil prices hovered around $100 per barrel on Monday, defying expectations of a significant drop despite the G7's announcement of a major supply boost. Brent crude futures rose slightly to $102.30 a barrel, while US West Texas Intermediate (WTI) fell marginally to $90.62 a barrel. The resilience in prices is largely attributed to ongoing concerns about supply disruptions in the Middle East, particularly due to the escalating US-Israeli conflict with Iran, which threatens to disrupt crude supplies, shipping routes, and energy infrastructure.
The G7 countries agreed to release 100 million barrels of diesel and crude oil from their emergency reserves to ease market tensions. However, traders remain skeptical about the actual impact of this release, as Middle Eastern crude exports have already exceeded pre-war levels in recent days. The supply picture remains tight, especially for refined fuels, with ICE gasoil futures jumping over 4% to $1,409 a metric ton due to China's decision to suspend some fuel exports, exacerbating supply constraints in the Far East.
Middle East tensions continue to add a risk premium to oil prices, with analysts warning that a ceasefire is unlikely and renewed fighting could further disrupt energy supplies. Saudi Aramco's CEO, Amin Nasser, cautioned that global oil markets may remain stretched for an extended period, and rebuilding oil stockpiles could take up to two years. Additionally, the G7's earlier release of 400 million barrels from emergency reserves has largely been depleted, raising questions about the effectiveness of the latest supply boost.
The situation is further complicated by fresh attacks involving Saudi Arabia and the Iran-backed Houthis, which have targeted key energy infrastructure. Continued fighting around the strategic Bab el-Mandeb Strait also poses a risk to shipping routes. Meanwhile, OPEC+ has delayed a review of 2027 oil production quotas, making future output predictions more challenging. The combination of these factors has created a volatile market, with the G7's supply boost counterbalanced by persistent geopolitical risks and tight refined-fuel supplies.