Oil Dips As Russia Sanctions And Geopolitical Tensions Are Shrugged Off

Meanwhile, Poland lays claim to a massive oil and gas deposit: File Image/Pixabay

Oil prices kicked off the new week by settling down slightly, with traders said to be largely unconcerned by the latest sanctions on Russian oil approved by the European Union on Friday.

John Kilduff, founding partner at Again Capital, explained, "The market right now thinks that supply will still make it to market in one way, shape or another; there is not too much concern."

Kilduff's remarks followed Kremlin spokesman Dmitry Peskov, who told media his country had built up a certain immunity to Western sanctions.

Accordingly, Brent settled down 7 cents to $69.21 per barrel, and West Texas Intermediate settled down 14 cents to $67.20.

Still, concern lingered about the potential of disruptions in Russian oil supply tightening supplies of diesel, and as a result the diesel crack spread on Monday began to firm significantly.

Meanwhile in the U.S., although Baker Hughes data showed that the number of operating oil rigs fell by two to 422 last week (the lowest total since September 2021), Alex Hodes, an analyst at StoneX, predicted drilling would remain at subdued levels for the remainder of the year, but "We aren't anywhere close to prices that merit a significant pullback in investment though."

As for the condition of the global oil market, Rob Thummel, senior portfolio manager and managing director at Tortoise Capital, told media,  "The global oil market is oversupplied right now and it's going to be oversupplied for the second half of the year, because OPEC+ is bringing back oil volumes back to the market.

"And typically, when you have an oversupplied oil market, inventories rise, and then prices fall, and that's exactly what we've seen."

Thummel also doubted that geopolitical risks would rise to any great degree, stating, "The biggest geopolitical risk to focus on still is Iran and the Strait of Hormuz, and any implications of a closure of the Strait of Hormuz, which we don't think is going to happen, or just a lowering of the export volumes that come out of Iran on a daily basis that could, you know, cause oil prices to rise."

In other oil news on Monday, Central European Petroleum announced a major oil and gas discovery off Poland's Baltic Sea coast; preliminary assessments suggest the well contains an estimated 22 million tonnes of recoverable crude oil and condensate, along with 5 billion cubic metres of commercial-grade natural gas.

The broader area may also hold over 33 million tonnes of oil and 27 billion cubic metres of gas, making this Poland's largest hydrocarbon deposit and one of Europe's most significant finds in the past decade.