Oil Prices Rally as the Geopolitical Risk Premium Rebuilds

Abiola Olawale
Writer

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Light crude oil futures rose for the week, closing Thursday at $63.52, up $1.54 or +2.48% from last Friday’s close, as geopolitical tensions, bullish inventory data, and renewed demand optimism drove a shift in market sentiment. The recovery followed two weeks of selling pressure and marked a return of bullish interest as supply-side risks reentered focus.

Crude began the week trading cautiously, weighed down by hopes that a diplomatic breakthrough in the Ukraine-Russia conflict could ease global supply constraints. Talks involving former U.S. President Donald Trump, Ukrainian President Volodymyr Zelenskiy, and the prospect of including Russia in a trilateral summit had traders pricing in the possibility of sanctions relief on Russian crude.

However, momentum for diplomacy unraveled midweek. Both Russia and Ukraine accused each other of derailing negotiations. Russia launched a major air assault near the EU border, and Ukraine responded with a strike on a Russian refinery. With no ceasefire in sight, the geopolitical risk premium began to build again. Analysts at Ritterbusch and Associates noted that “some geopolitical risk premium is slowly being pumped back into the market,” while others warned of renewed speculation around tighter Russian sanctions.

The abrupt reversal in tone shifted market sentiment sharply, providing key support to crude prices that had been drifting lower on peace.

Credit: Oilprice.com

 

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