May 6 2024: Oil futures increased on Monday after Saudi Arabia raised June crude prices for most regions and amid escalating tensions in Gaza, raising concerns that the conflict between Israel and Hamas could expand in the crucial oil-producing area.
At 0636 GMT, Brent crude futures rose by 51 cents, or 0.6%, to $83.47 a barrel, while U.S. West Texas Intermediate crude futures were up by 53 cents, or 0.7%, at $78.64 a barrel.
Last week, both Brent and WTI experienced their most significant weekly losses in three months, with Brent falling more than 7% and WTI dropping by 6.8%. This decline was influenced by weak U.S. jobs data and speculation about the Federal Reserve’s timing for a potential interest rate cut.
The geopolitical risk premium in oil prices eased as ceasefire talks for Gaza were underway. However, the likelihood of a deal diminished on Sunday when Hamas reiterated its demand for an end to the war as a condition for releasing hostages, a condition rejected by Israeli Prime Minister Benjamin Netanyahu.
On Monday, Israel’s military called for the evacuation of civilians from Rafah as part of a ‘limited scope’ operation, raising concerns about a potential ground assault and reigniting tensions in the Middle East.
“With most of the long positions in oil cleared last week, the risks appear to be for WTI prices to rebound back towards $80 in the early part of this week,” said Tony Sycamore, an analyst at IG markets.
Additionally, Saudi Arabia’s decision to raise the official selling prices (OSPs) for its crude to Asia, Northwest Europe, and the Mediterranean in June indicated expectations of robust summer demand, further supporting oil prices.
Amidst signs of tightening supplies and positive economic indicators in China, the world’s largest crude importer, oil markets are closely monitoring developments in the Middle East and global demand trends.
