Oil Edges Up Amid Israel Strikes on Gaza, Ongoing Truce Talks
Oil prices edged up on Tuesday following Israeli airstrikes on Rafah in Gaza, with ceasefire negotiations in limbo. This maintained the market’s support amid heightened tensions in the Middle East and concerns about potential disruptions to oil supplies.
The Israeli military took control of the Rafah border crossing between the Gaza Strip and Egypt, with tanks advancing into the southern Gazan town of Rafah. Mediators faced challenges in brokering a ceasefire agreement amid escalating tensions.
Brent crude futures dipped 7 cents to $83.26 a barrel by 0950 GMT, while U.S. West Texas Intermediate (WTI) crude futures remained steady at $78.48.
Tamas Varga of oil broker PVM remarked, „Truce remains elusive, and even if it is reached the question remains whether Houthi hostilities in the Red Sea would cease and the Suez Canal would reopen, significantly mitigating the risk of shipping throughout the region.“
He added, „I believe the lack of optimism of the past few days is more the result of genuine weakness in the physical markets.“
The premium of the first-month Brent contract to the six-month contract slipped to $2.95 a barrel on Monday, signaling a potential easing concern that supply could tighten. This was the lowest level since mid-February and remained near that level on Tuesday.
On Monday, crude settled higher, partially reversing last week’s drop. Brent and WTI experienced their most significant weekly declines in three months as market focus shifted towards weak U.S. jobs data and the potential timing of a Federal Reserve interest rate cut.
Gains were capped by a stronger dollar, which made crude more expensive for traders holding other currencies.
Aside from tensions in the Middle East, investors will also closely monitor the latest U.S. inventory reports.
U.S. crude oil and product stockpiles were anticipated to have declined last week, according to a Reuters poll. Analyst forecasts suggested that crude inventories could have decreased by approximately 1.2 million barrels in the week ending May 3. [EIA/S]
Saudi Arabia’s decision to increase official selling prices for its crude sold to Asia, Northwest Europe, and the Mediterranean in June further bolstered prices, indicating anticipated robust demand for the summer season.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76.87% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
