Oil prices saw a significant jump on Monday, propelled by a combination of factors including Saudi Arabia’s decision to raise June crude prices and concerns over the precarious situation in the Middle East.
Brent crude futures rose by 43 cents, or 0.5%, to $83.39 a barrel at 1300 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed to $78.62 a barrel, up by 51 cents, or 0.7%.
Last week, both Brent and WTI futures experienced their sharpest weekly decline in three months, with Brent falling over 7% and WTI down by 6.8%. This decline came amidst weak U.S. jobs data and speculation regarding the timing of a Federal Reserve interest rate cut.
However, Monday saw a reversal in this trend as concerns over the Israel-Hamas conflict intensified. With the possibility of a Gaza ceasefire dwindling, fears mounted that the conflict could escalate in the oil-producing region. Hamas reiterated its demand for an end to the war in exchange for releasing hostages, while Israel hinted at a potential military operation in the southern Gaza Strip.
Israel’s military urged Palestinian civilians to evacuate Rafah as part of what it termed a “limited scope” operation. Analysts like Tony Sycamore from IG Markets highlighted the risk of renewed geopolitical tensions in the Middle East, which had seemed to be easing.
Another factor supporting oil prices was Saudi Arabia’s decision to increase the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe, and the Mediterranean in June. This move signaled the kingdom’s confidence in strong summer demand.
Meanwhile, in China, the world’s largest crude importer, service sector activity continued to expand for the 16th consecutive month. Growth in new orders accelerated, and business sentiment improved, fostering hopes of a sustained economic recovery.
Oil prices jump on Monday, driven by geopolitical tensions and Saudi Arabia’s price hike, and positive economic indicators from China. However, concerns over the Israel-Hamas conflict and its potential impact on oil supply dynamics continue to weigh on market sentiment.
