Oil futures climbed Monday after Saudi Arabia raised June crude prices for most regions and the prospect of a Gaza ceasefire deal appeared weak, reviving fears that the conflict between Israel and Hamas could worsen further in the main oil-producing region.
Brent crude futures gained 34 cents, or 0.4 percent, to $83.30 a barrel by 0518 GMT, while U.S. West Texas Intermediate crude futures were at $78.45 a barrel, in increase of 34 cents, or 0.4%.
Saudi Arabia raised official selling prices (OSPs) for its crude sold to Asia, northwest Europe and the Mediterranean in June, signaling expectations of strong demand this summer.
“After falling just over 7.3% last week due to easing geopolitical tensions, Brent ICE began the new trading week on firmer footing, opening higher,” said Warren Patterson, head of commodities research at ING, in a note.
The rise comes after Saudi Arabia raised June selling prices for most regions, amid tighter supply in the quarter, it added.
In China, the world’s largest crude importer, services activity remained expanding for the 16th consecutive month, while growth in new orders accelerated and the business climate solidly improved, reinforcing hopes for a sustained economic recovery.
Last week, both futures posted their biggest weekly losses in three months, with Brent falling more than 7% and WTI falling 6.8%, as investors took into account weak data on the employment in the United States and the possible timing of an interest rate cut by the Federal Reserve.
The geopolitical risk premium on oil prices has also eased as negotiations for a ceasefire in Gaza are underway.
However, prospects for a deal appeared slim on Sunday as Hamas reiterated its demand to end the war in exchange for the release of hostages, while Israeli Prime Minister Benjamin Netanyahu categorically ruled out the possibility.
“News that Israel wants to move forward and expand its operation in Rafah risks derailing a potential ceasefire deal and reigniting geopolitical tensions in the Middle East that appeared to be easing,” he said. Tony Sycamore, Markets Analyst at IG.
With most long oil positions liquidated last week, the risks appear to be that WTI prices rebound towards $80 early this week, he added.
In a sign that supply could be tightening, U.S. energy companies reduced the number of oil and natural gas drilling rigs for the second straight week last week. The number of oil rigs fell by seven to 499, marking the largest weekly decline since November 2023, Baker Hughes said in a report released Friday. (Reporting by Florence Tan; Editing by Sonali Paul)
