Tuesday’s dramatic jump was the biggest single-day gain since March 23, pushing oil prices to their highest closing level since April 5. U.S. West Texas Intermediate (WTI) crude added $3.17, or 4.88%, to settle at $68.15. Likewise, international benchmark Brent crude oil futures settled at $69.77/bbl, up $2.90 (4.34%). The recent rise in oil prices has occurred against a backdrop of heightened tensions in the Middle East that have added to market jitters.
This increase in both WTI and Brent crude prices is indicative of rising fear about geopolitical stability in that region. Indeed, as analysts point out, any disruptions to oil supply from the Middle East can have a huge impact on global oil markets. With that said, traders have their eyes peeled for developments that could continue to affect production and distribution.
The increase in crude oil prices isn’t just an interesting talking point, it’s symptomatic of the continuing volatility among the sector. As of early April, WTI and Brent crude prices were tightly synced. This recent spike indicates that they are much more sensitive to international events that affect oil supply chains today. Given the unpredictable nature of current tensions, market participants are always on guard to hear or see something that might compound the current situation.
Energy experts warn that the current crisis could usher in longer, sustained periods of elevated prices should conflicts escalate. As the cost of crude oil continues to set records, consumers will inevitably pay the price. So, be prepared to see gasoline prices go up in the coming weeks.
Geopolitical factors may not be the main actor in the oil price drama. Market forces, such as overall supply constraints or shifts in demand, play an essential role in affecting prices, too. What we are witnessing with recent surges in commodity prices is just the tip of the iceberg. As economies bounce back from the economic effects of the COVID-19 pandemic, inflation is pushing prices up.