The price of Brent oil after a six-month break rose above $90 per barrel

The price of Brent oil after a six-month break rose above $90 per barrel. The price of Russian Urals exceeded $78 per barrel. The price was pushed to multi-month highs by increased geopolitical risks in the Middle East after the Israeli attack on the Iranian consulate in Syria. Analysts note increased risks of Iran being involved in the conflict, which could lead to a decrease in oil supplies to the world market and a reciprocal rise in prices above $100 per barrel. At the same time, on the Russian foreign exchange market, the increase in the cost of oil did not lead to a significant strengthening of the ruble.

According to Investing.com, on Wednesday, April 3, the price of North Sea Brent oil on the spot market rose above $90 per barrel for the first time since the end of October last year. During trading, the price reached $90.44 per barrel, which is 0.7% higher than Tuesday’s closing value. Quotes of Russian Urals, according to Profinance, reached $78 per barrel, the maximum since October 30, 2023. Since the beginning of the year, prices for European oil grades have increased by 17-20%, since the beginning of this week – by 3.1-3.2%.

The renewal of the multi-month high was facilitated by another aggravation of the geopolitical situation in the Middle East after an Israeli airstrike on the Iranian consulate in Damascus.

Iranian President Ebrahim Raisi promised that the attack on the consulate would not go unanswered. As a result, as noted by senior analyst at SberCIB Investment Research Konstantin Samarin, as in October-December, the risks of Iran’s full participation in the conflict in the Middle East have increased. Trading Economics also notes an increase in the risk of interruptions in oil supplies after Tehran’s statements about its planned response to the Israeli airstrike. Iran is one of the largest oil exporters with about 2 million barrels per day, or 2% of global demand. The loss of even half of this volume, according to senior analyst at BCS World of Investments Ronald Smith, would have a noticeable impact on world oil prices. In addition, Iran could seriously impede the movement of ships in the Persian Gulf area. “About 20 million barrels per day, or 20% of global oil demand, passes through the Strait of Hormuz, coming not only from Iran, but also from Iraq, Kuwait and the UAE,” Mr. Smith notes. If Iran takes “direct military action, this could temporarily raise the price of oil to $100 per barrel, even if this does not affect oil flows,” the expert notes.

In the absence of further escalation of the situation in the Middle East, the rise in oil prices will be short-lived, analysts say. At the same time, according to Konstantin Samarin, the price of Brent oil will be fixed in the range of $85–90 per barrel.

The increase in the price of Russia’s key export commodity had a limited impact on the Russian foreign exchange market. During Wednesday’s trading, the dollar exchange rate on the Moscow Exchange dropped to 91.91 rubles/$, and at the end of trading it stopped at 92.4 rubles/$. This is only 18 kopecks. below Tuesday’s closing values ​​and by 8 kopecks. below the end of last week. High oil prices can no longer fully support the ruble exchange rate. There are several reasons for this, according to the chief economist of Zenit Bank, Marina Nikishova: payment problems when paying for Russian exports, a decrease in oil exports in quantitative terms. “In the second half of the year, an acceleration in the decline in exports is possible due to geopolitics and restrictions, which will put pressure on the ruble exchange rate,” the expert believes. As a result, in the second quarter, according to her estimates, the dollar exchange rate will remain in the range of 92–95 rubles/$, and by the end of the year it could rise to 95–100 rubles/$.

Vitaly Gaidaev