June 22, 2024
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OIL & GAS

Oil Futures Rise as Saudi Arabia Raises Prices

Oil futures climbed on Monday following Saudi Arabia’s decision to increase June crude prices for most regions and amid concerns over the potential widening of the Israel-Hamas conflict, particularly in the key oil-producing region.

According to Reuters, Brent crude futures rose by 77 cents, or 0.9%, to $83.73 a barrel, while U.S. West Texas Intermediate crude futures reached $78.98 a barrel, up 87 cents, or 1.1%, as at 1055 GMT.

Both Brent and WTI futures had experienced their sharpest weekly losses in three months the previous week, with Brent falling over 7% and WTI down 6.8%. These declines were attributed to weak U.S. jobs data and speculation about the timing of a Federal Reserve interest rate cut.

Despite ongoing talks for a Gaza ceasefire, the geopolitical risk premium in oil prices decreased. However, hopes for a ceasefire deal dwindled as Hamas reiterated its demands and Israel prepared for potential military action in the southern Gaza Strip.

“News that Israel wants to go ahead and extend its operation into Rafah risks derailing a potential ceasefire agreement and reigniting Middle Eastern geopolitical tensions which had appeared to be easing,” commented IG markets analyst Tony Sycamore.

Additionally, oil prices received support from Saudi Arabia’s decision to raise the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe, and the Mediterranean in June, indicating expectations of robust demand during the summer months.

In China, the world’s largest crude importer, services activity continued to expand for the 16th consecutive month, with growth in new orders accelerating and business sentiment improving. This bolstered hopes for a sustained economic recovery.

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