Crude oil price outlook after first weekly loss in weeks

Crude oil price recorded its first weekly loss after eight consecutive weeks in the green. Investors are evaluating the market amid the probable return of Iranian oil. Besides, developments of the Russia-Ukraine conflict remain a key driver in the energy market. Brent futures hit a high of $95 in early Monday trading before pulling back to $93.19 as at 07:15 a.m GMT.

Ukraine-Russia tensions

As was the case in the past week, the geopolitical tensions in eastern Europe will be a key driver of crude oil price in the new week. On the one hand, Russia has maintained that it does not intend to invade Ukraine, even as US officials warn of an imminent attack.

In fact, a US official has indicated that based on attained intelligence, the Kremlin has ordered Russian commanders to execute an invasion on Ukraine. During an interview with CBS News, the official noted that the order  does not necessarily mean that an attack is certain. This is founded on that President Putin is still in a position to reverse the orders. On Friday, President Biden stated that he is “convinced” that Russia intend to attack Ukraine in “coming days”.

In late last week, a decline in the geopolitical risk premium pushed crude oil price from the week’s high of $96.79 to an over one-week low of $90.25. With the new development in the Ukraine-Russia conflict, the bulls have an opportunity to retest and surpass the 2014 high hit in the past week. From this perspective, the next target will likely be at an 8-year high of $97.75.

Iranian oil

The probable return of Iranian oil is also curbing crude oil price gains. Iranian nuclear talks are on the last leg. With the successful return of the nuclear deal, Iranian oil is expected to the market as the US lifts sanctions on the nation’s oil exports. With the country being one of the key producers of oil in the world, the move would ease the tight supplies.

Even so, crude oil price will likely remain on an uptrend amid supply concerns. In mid-last week, Dated Brent surpassed the psychologically crucial level of $100 for the first time in 8 years. Dated Brent refers to the price of the crude transacted in the North Sea.

Its importance is founded on its role as the baseline of daily transactions in the crude oil market. Besides, it is a sign that the futures prices are a reflection of the situation on the ground. On Wednesday when Dated Brent was at $100.80 per barrel, Brent futures were at an intraday high of $96.12; slightly below the 2014 high of $96.79 that it hit two days earlier.

The extreme backwardation signal heightened demand in the near term; seeing that futures contracts for immediate-term delivery are higher priced compared to those of later months.