Oil futures rose on Monday after Saudi Arabia raised June crude oil prices in most regions and the prospect of a ceasefire agreement in Gaza looked slim, renewing fears that the conflict could expand in the key oil-producing region.
Brent crude futures were up 51 cents, or 0.6%, at $83.47 a barrel at 06:36 GMT, while WTI crude futures were up 53 cents, or 0.7%, at $78.64 a barrel.
Last week, both futures contracts posted their steepest weekly losses in three months, with Brent falling more than 7% and WTI falling more than 6.8% as investors weighed weak U.S. employment data and the possible timing of a Federal Reserve interest rate cut. With the start of ceasefire talks in Gaza, the geopolitical risk premium in oil prices decreased.
But on Sunday, the chances of a deal appear slim as Hamas reiterated its demand for an end to the war in exchange for the release of the hostages, which Netanyahu flatly rejected.
On Monday, the Israeli army called on Palestinian civilians to evacuate Rafah. Reports that Israel wants to expand its operation to Rafah risk derailing a possible ceasefire agreement and reigniting geopolitical tensions in the Middle East that were thought to have eased.
With most oil long positions cleared last week, WTI prices will likely rebound towards $80 by the beginning of this week.
Expecting an increase in prices, Saudi Arabia signaled that demand would be strong this summer by increasing the official sales prices (OSP) of its crude oil sold to Asia, Northwest Europe, and the Mediterranean in June.
After falling slightly more than 7.3% last week as geopolitical tensions eased, ICE Brent started the new trading week on a stronger footing and opened higher. This comes after Saudi Arabia raised June OSPs for most regions amid a tightening of supplies this quarter.
In China, the world’s largest crude oil importer, services activity remained in expansion territory for the 16th consecutive month, while new orders growth accelerated and business confidence rose strongly; This raises hopes for a sustainable economic recovery.
In a sign that supply may be tightening, U.S. energy companies last week reduced the number of oil and gas drilling rigs operating for the second week in a row. The number of oil rigs fell by 7 to 499, marking the biggest weekly decline since November 2023, Baker Hughes said.
