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Oil prices rise above $90 for the first time in six months: Reason

Oil prices rise above $90 for the first time in six months: Reason Photo: Oil prices rose to $90 for the first time since October 2023 (Getty Images)

Prices for Brent oil rose above $90 for the first time since October last year as geopolitical tensions and production cuts outweighed caution about Federal Reserve rate cuts in the United States, reports Reuters.

Brent futures rose 1.5% to $90.65 per barrel on April 5. WTI crude oil futures rose 1.4% to $86.60 per barrel.

Geopolitical risks

Oil rose on April 4 after reports that Israeli embassies worldwide were put on heightened alert due to threats of an Iranian attack on Israeli diplomats.

Iran, the third-largest producer in OPEC, promised retaliation against Israel for the strike that killed senior Iranian military officials. Israel did not claim responsibility for the attack on the Iranian embassy complex in Syria.

Changing its tone sharply, Washington on April 4 issued its strongest public rebuke of Israel since the start of the war against Hamas, warning that U.S. policy towards Gaza would be determined by whether Israel took steps to ensure the security of Palestinian civilians and humanitarian aid workers.

At the same time, the United States imposed new anti-terrorism sanctions related to Iran against Oceanlink Maritime DMCC and its vessels, citing its role in shipping goods on behalf of Iranian military personnel.

The United States uses financial sanctions to isolate Iran, depriving it of the ability to finance its proxy groups and impede the country from supporting Russia's war against Ukrainians, the Treasury Department said.

Prices also received support after U.S. Secretary of State Antony Blinken said Ukraine would eventually join NATO, as support for the country remains firm among member states.

Recent oil price hikes also followed Ukraine's attacks on Russian oil refineries, which reduced fuel supplies, as well as news that Mexico's state energy company Pemex demanded its trading unit cancel crude oil exports of up to 436,000 barrels per day this month as it prepares to process local oil at new prices.

"All of these geopolitical factors happened at once, driving bullish sentiment and ultimately some profit taking," said Frank Monkam, senior portfolio manager at Altimo LLC.

Fed rate

As Reuters notes, investors will look to economic data and monetary policy as potential indicators of oil demand prospects.

Earlier, Federal Reserve Chairman Jerome Powell expressed caution about the timing of future interest rate cuts after recent data showed higher-than-expected job growth and inflation.

Impact of oil prices on Ukraine

Since the start of the war, Ukraine has imported almost all of its fuel. The main factor affecting fuel prices in Ukraine is global oil prices. In 2023, prices fell by 10% to $77.5 per barrel of Brent, leading to a decrease in gasoline and diesel prices.

Since the beginning of the year, oil prices have been rising, leading to an increase in gasoline and diesel prices in Ukraine.