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Oil futures saw an uptick on Monday, May 6, following Saudi Arabia’s decision to raise crude prices for most regions in June, coupled with escalating concerns over the conflict between Israel and Hamas, which could potentially impact oil production.
At 0119 GMT, Brent crude futures climbed 28 cents, or 0.3%, reaching $83.24 per barrel, while US West Texas Intermediate crude futures rose by 29 cents, or 0.4%, hitting $78.40 per barrel.
Saudi Arabia’s Crude Price Adjustment
Saudi Arabia’s move to raise the official selling price for its crude sold to Asia, northwestern Europe, and the Mediterranean in June reflects expectations of heightened demand during the upcoming summer season. This adjustment follows an increase in the official selling price of its main Arab Light crude oil for June across most regions, indicating supply constraints during this quarterly period.
Impact of Previous Week’s Market Performance
During the previous week, both Brent and West Texas Intermediate crude futures witnessed their largest weekly losses in three months, with Brent experiencing a decline of over 7% and West Texas Intermediate crude dropping by 6.8%. Investors were assessing the implications of weak US jobs data alongside speculation about potential interest rate cuts by the US Federal Reserve.
Geopolitical Tensions and Market Response
The geopolitical risk premium in oil prices saw a reduction as talks for a ceasefire in Gaza continued. However, tensions escalated as the prospects for a ceasefire diminished on Sunday, amplifying concerns about the stability of oil supplies in the region.
US Energy Companies’ Response
In a potential signal of tightening supplies, US energy companies reduced the number of operating oil and natural gas rigs for the second consecutive week, cutting seven rigs to reach a total of 499 rigs. This marks the largest weekly decline since November 2023, as reported by Baker Hughes in its Monday release.
