May 7 2024: Oil prices stabilized on Tuesday as concerns about conflict in the Middle East were balanced by weakness in the physical market. Israel’s intensified attacks in southern Gaza and ongoing mediation efforts for a ceasefire between Hamas and Israel added to market uncertainties.
The Israeli military took control of the Rafah border crossing between Gaza and Egypt, with tanks entering the southern Gazan town of Rafah. Despite mediation attempts, a lasting ceasefire agreement remained elusive.
At 0950 GMT, Brent crude futures dipped by 7 cents to $83.26 per barrel, while U.S. West Texas Intermediate (WTI) crude futures remained steady at $78.48.
Oil broker PVM’s Tamas Varga noted the difficulty in achieving a truce and highlighted ongoing concerns about Houthi activities in the Red Sea affecting shipping, contributing to market cautiousness.
The physical market’s weakness played a significant role, with the premium of the first-month Brent contract over the six-month contract narrowing to $2.95 a barrel, a level not seen since mid-February.
Monday saw a partial rebound in crude prices after last week’s sharp decline, attributed to weak U.S. jobs data and speculation about a Federal Reserve interest rate cut. However, gains were capped by a stronger dollar, impacting crude prices for traders using other currencies.
Additionally, market attention is on the latest U.S. inventory reports. Analysts anticipated a decrease in crude and product stockpiles, with a forecasted drop of about 1.2 million barrels in crude inventories for the week ending May 3, according to a Reuters poll. Saudi Arabia’s decision to raise official selling prices for its crude, signaling robust summer demand, also provided support to prices.
