Brent crude futures were 0.2% lower at $68.59 a barrel at 0106 GMT, after gaining 1.3% on Monday.US West Texas Intermediate crude traded at $63.73 a barrel, up 84 cents or 1.34%, but the move included all of Monday’s price action as the contract did not settle that day due to the US President’s holiday.
Many markets are closed on Tuesday for the New Year holiday, including mainland China, Hong Kong, Taiwan, South Korea and Singapore.
“The market remains unsettled amid ongoing geopolitical uncertainties,” Daniel Hynes, an analyst at ANZ, said in a research note.
“If tensions in the Middle East ease, or if meaningful progress is made in the situation in Ukraine, the risk premium currently built into oil prices could quickly disappear. However, any negative outcome or further escalation could prove bullish for oil.” Iran on Monday began a military exercise in the Strait of Hormuz, a crucial international waterway and oil export route from Gulf Arab states, which have called for diplomacy to end the dispute.
Iran, along with other OPEC members Saudi Arabia, the United Arab Emirates, Kuwait and Iraq, export most of their crude oil through the strait, mainly to Asia.
Meanwhile, Citi said that if Russian supply disruptions keep Brent in the $65 to $70 per barrel range in coming months, OPEC+ will likely respond by increasing production from spare capacity.
OPEC+ is trending towards a resumption of oil production increases from April, three OPEC+ sources said, as the group prepares for peak demand in the summer and price strength is boosted by tensions over US-Iran relations.
“Our base case is that both Iran and Russia-Ukraine deals come to fruition around or during the summer of this year, contributing to a decline in prices to $60-62/bbl Brent,” Citi said.
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