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Oil prices climb on Gaza tensions and Saudi price hike

May 6, 2024

Key points:

  • Saudi Arabia hikes June crude oil prices for most regions
  • US oil rig count falls by 7 to 499, Baker Hughes reports

Brent crude futures gained 51 cents, or 0.6%, to $83.47 a barrel at 0636 GMT, while U.S. West Texas Intermediate crude futures were at $78.64 a barrel, up 53 cents, or 0.7%.

Last week, both futures contracts posted their steepest weekly loss in three months with Brent falling more than 7% and WTI down 6.8%, as investors weighed weak U.S. jobs data and the possible timing of a Federal Reserve interest rate cut.

Chart showing rising Oil on the VT Markets Trading App.

Picture: Oil prices on the rise as seen on VT Markets app.

Gaza ceasefire talks begin

The geopolitical risk premium in oil prices also eased as talks for a Gaza ceasefire were underway. However, prospects for a deal appeared slim on Sunday as Hamas reiterated its demand for an end to the war in exchange for the freeing of hostages, and Israeli Prime Minister Benjamin Netanyahu flatly ruled that out.

On Monday, Israel’s military called on Palestinian civilians to evacuate Rafah as part of a ‘limited scope’ operation, but did not immediately confirm media reports this was part of preparation for a ground assault.

Saudi Arabia’s crude price hike signals strong demand

Also bullish for prices, Saudi Arabia raised the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe and the Mediterranean in June, signaling expectations of strong demand this summer. “After falling a little more than 7.3% last week due to easing geopolitical tensions, ICE Brent has started the new trading week on a stronger footing, opening higher,” ING’s head of commodities research Warren Patterson said in a note. 

China’s services sector shows resilience

In China, the world’s largest crude importer, services activity remained in expansionary territory for the 16th straight month, while growth in new orders accelerated and business sentiment rose solidly, boosting hopes of a sustained economic recovery.

In a sign supply may tighten, U.S. energy companies cut the number of oil and natural gas rigs operating for a second week in a row last week. Oil rigs fell by seven to 499, in the biggest weekly drop since November 2023, Baker Hughes said in a report on Friday.

Also read: Oil stabilises, set for weekly fall on US economy concerns

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