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Wednesday, 22. May 2024

Oil prices rise on Middle East tensions, economic data in focus


Oil prices inched up in Asian trade on Tuesday, partially recovering lost ground. Attention remained on ceasefire talks between Israel and Hamas, with sentiment subdued due to anticipation of key economic data this week.

Profit-taking occurred in crude markets on Monday, driven by reports of Israel withdrawing troops from certain areas of Gaza and engaging in new ceasefire discussions with Hamas in Egypt. Despite this, oil prices stayed near five-month highs as talks between Israel and Hamas remained deadlocked. Additionally, uncertainty persisted over the possibility of Iran entering a new conflict with Israel.

These factors maintained the buoyancy of crude prices on Tuesday. Brent oil futures expiring in June increased by 0.6% to $90.89 a barrel, while West Texas Intermediate crude futures rose by 0.6% to $86.00 a barrel by 20:51 ET (00:51 GMT).

Oil markets remain focused on tensions in the Middle East

Concerns about escalating geopolitical tensions in the Middle East have been a significant factor supporting crude prices over the past month. This is particularly evident as Iran issued threats of military action against Israel following an alleged strike on an embassy in Syria.

The possibility of an imminent ceasefire between Israel and Hamas remained elusive, as the two parties have been unable to reach an agreement despite repeated mediation efforts by the U.S. and its allies.

Additional supply disruptions would likely exacerbate the tightening of global oil markets. The situation was compounded by the recent decision of the Organization of the Petroleum Exporting Countries and its allies to continue their production cuts until the end of June, further constraining the outlook for oil markets.

Inflation data and signals regarding interest rates are also under close scrutiny

Crude prices were restrained as investors awaited significant inflation data from both the U.S. and China, limiting any substantial market movements.

Investors are eagerly awaiting the release of U.S. consumer price index inflation data scheduled for Wednesday, which is anticipated to influence the Federal Reserve‚s stance on interest rates. Additionally, the minutes of the Fed’s March meeting are also set to be released on the same day.

Chinese consumer and producer inflation figures are scheduled for release on Thursday, providing further insights into the deflationary trend within the world’s largest oil importer.

The readings are also anticipated to provide additional signals regarding the state of the Chinese economy, following some encouraging purchasing managers index readings for March.

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