Oil prices saw an uptick in Asian trade on Monday, building on the strength from the previous week with gains of nearly 4%. Brent crude oil futures for May delivery rose by 47 cents to reach $85.81 a barrel, while the April contract for U.S. West Texas Intermediate (WTI) crude was up by 49 cents at $81.53. The more active May delivery contract for WTI traded 50 cents higher at $81.08 per barrel.

The increase in oil prices comes amidst tightening supply concerns, further exacerbated by recent attacks on Russian energy infrastructure. Vandana Hari, founder of oil market analysis provider Vanda Insights, noted that the strikes on Russian refineries have added a risk premium of $2-$3 per barrel to crude prices, a sentiment echoed by market analysts.

Over the weekend, attacks on Russian refineries continued, with one incident causing a brief fire at the Slavyansk refinery in Kasnodar, which processes 8.5 million metric tons of crude oil annually. These attacks have led to the idling of approximately 7% of Russian refining capacity in the first quarter, affecting crude oil exports to markets like China and India.

In addition to supply concerns, geopolitical tensions in the Middle East, particularly in Gaza, have also influenced market sentiment. Israeli Prime Minister Benjamin Netanyahu confirmed plans to push into Gaza’s Rafah enclave, raising concerns about regional stability.

Investors are also closely monitoring the outcome of the U.S. Federal Reserve’s meeting, which will provide clarity on the timing of interest rate cuts. Lower interest rates could stimulate demand in the U.S., the world’s largest oil consumer, thereby supporting oil prices.

Despite fluctuations, both Brent and WTI futures have posted significant gains in 2024, up 11% and 13%, respectively, as of Friday’s close. The bullish outlook is driven by factors such as tightening supply, geopolitical tensions, and potential interest rate cuts.

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