Oil prices fall but remain near 2-week highs due to tensions between Russia and Iran

By Florence Tan and Gabrielle Ng

SINGAPORE (Reuters) – Oil prices fell on Monday after rising 6% last week, but remained near two-week highs as geopolitical tensions grew between Western powers and major oil producers Russia and Iran, the Increased risk of supply interruption.

Brent crude futures fell 26 cents, or 0.35%, to $74.91 a barrel by 0440 GMT, while U.S. West Texas Intermediate crude futures were at $70.97 a barrel, which represents a decrease of 27 cents or 0.38%.

Both contracts posted their biggest weekly gains since late September last week, reaching their highest settlement levels since November 7, after Russia fired a hypersonic missile at Ukraine as a warning to the United States and the United Kingdom after Kiev struck Russia with U.S and British weapons had attacked.

“Oil prices start the new week with a slight cooldown as market participants wait for further clues from geopolitical developments and the Fed’s policy outlook to set the tone,” said Yeap Jun Rong, market strategist at IG.

“Tensions between Ukraine and Russia have increased recently, leading to some pricing in the risks of a major escalation that could potentially impact oil supplies.”

With both Ukraine and Russia struggling to gain some leverage ahead of upcoming negotiations under a Trump administration, tensions could likely continue into the end of the year, keeping Brent prices around $70 to $80, Yeap added .

In addition, Iran responded to a resolution adopted by the UN nuclear regulator on Thursday by ordering measures such as the commissioning of various new and advanced centrifuges for uranium enrichment.

“The IAEA’s criticism and Iran’s response increase the likelihood that Trump will seek to enforce sanctions on Iran’s oil exports if he comes to power,” Vivek Dhar, commodities strategist at the Commonwealth Bank of Australia, said in a note.

Enforced sanctions could knock out about 1 million barrels a day of Iran’s oil exports, about 1% of global oil supplies, he said.

Iran’s foreign ministry said on Sunday it would hold talks with three European powers on November 29 over its controversial nuclear program.

“Markets are worried not only about damage to oil ports and infrastructure, but also about the possibility of war contagion and involvement of other countries,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors also focused on rising demand for crude oil in China and India, the world’s largest and third-largest importers, respectively.

China’s crude oil imports rebounded in November as lower prices boosted demand for inventories, while Indian refiners increased their crude oil throughput 3% year-on-year to 5.04 million bpd in October, buoyed by fuel exports.

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