Oil Snaps Three-Day Drop as Russian Attacks Fan Global Tensions

(Bloomberg) -- Oil gained on escalating geopolitical unrest following attacks in Russia, as well as positive commentary about the outlook for commodities.

Brent crude rose toward $86 a barrel after losing more than 2% in the final three days of last week, while West Texas Intermediate was above $81.  A terrorist attack in Moscow over the weekend left more than 130 people dead. The assault was claimed by Islamic State, although President Vladimir Putin hinted at Ukrainian involvement. In addition, continued drone strikes by Ukraine are also crimping Russia’s crude-refining capabilities. 

Crude is headed for a third monthly gain as OPEC+ presses on with output curbs and the US tightens sanctions on Russian flows. While China’s shaky demand outlook has been a headwind, Premier Li Qiang said Beijing was stepping up policy support to spur growth. Reflecting the bullish mood, money managers’ net-long positions on Brent have risen to the highest in more than a year.

“On one hand, demand and supply seems balanced, with the Saudis maintaining spare capacity, but on the other hand disruptions are around the corner” amid supply risks, said Stefano Grasso, senior portfolio manager at Singapore-based fund 8vantedge Pte. “Given the supportive macro picture and two wars near oil-producing countries, we remain surprised on how low oil prices have been.”

Goldman Sachs Group Inc., meanwhile, said commodities will advance this year as central banks reduce interest rates, helping to support industrial and consumer demand. That cautiously bullish outlook echoed recent comments from other market watchers including Macquarie Group Ltd. and Carlyle Group LP.

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