OIL RISES ON SAUDI ARABIA'S DECISION TO HIKE PRICES, BRENT CRUDE AT $83.39/BBL
Oil futures saw an increase on Monday following Saudi Arabia's decision to raise June crude prices for most regions. Additionally, concerns grew over the possibility of a ceasefire agreement in Gaza, leading to renewed fears of potential escalation in the oil-rich region due to the Israel-Hamas conflict.
Brent crude futures rose by 43 cents, or 0.5 per cent, to $83.39 per barrel at 1300 GMT, while U.S. West Texas Intermediate crude futures climbed to $78.62 per barrel, up by 51 cents, or 0.7 per cent.
During the previous week, both futures contracts experienced their most substantial weekly decline in three months. Brent witnessed a decline of over 7%, while WTI saw a decrease of 6.8%. Investors deliberated over weak U.S. jobs data and speculated on the potential timing of a Federal Reserve interest rate cut, contributing to this downturn.
“Crude Oil prices are seen trading positive today after Saudi Arabia raised its official oil selling price for most regions, and on fading hopes of a ceasefire in the Israel-Hamas war, however, price gains look limited as supply from the middle-east remains unaffected. Demand outlook still looks mixed as the global economic activity is again losing momentum due to high interest rates,” said Crude Oil by Pranav Mer, VP - Research (Commodity & Currency) BlinkX and JM Financial.
What's weighing on crude oil prices?
- The geopolitical risk premium in oil prices also relaxed as negotiations for a Gaza ceasefire progressed. However, the potential for an agreement diminished as Hamas restated its demand for an end to the conflict in return for releasing hostages, and Israel seemed ready to initiate a long-anticipated assault in the southern Gaza Strip.
- Israel's military issued a call on Monday for Palestinian civilians to evacuate Rafah as part of a "restricted scale" operation.
- Additionally, oil received support from Saudi Arabia's decision to increase the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe, and the Mediterranean in June, indicating anticipation of robust demand during the upcoming summer season.
Also read: Oil crawls back towards 7-week low-mark after US Fed keeps rates at 23-year high; Brent at $83/bbl
- In China, the globe's foremost crude importer, service sector activity continued its expansion for the 16th consecutive month. Additionally, the pace of growth in new orders quickened, and business sentiment strengthened considerably, fostering optimism for a continual economic resurgence.