Oil Prices React to Saudi Moves and Gaza Tensions

Oil futures surged on Monday following Saudi Arabia’s decision to increase crude prices for most regions in June, coinciding with escalating tensions in the Gaza Strip, raising concerns about a broader conflict in the major oil-producing area.

At 0852 GMT, Brent crude futures climbed by 73 cents, or 0.9 percent, reaching $83.69 per barrel, while US West Texas Intermediate crude futures saw an increase of 84 cents, or 1.1 percent, to $78.95 per barrel.

The previous week witnessed significant losses in both crude oil futures, with Brent experiencing a decline of over seven percent and West Texas Intermediate crude falling by 6.8 percent. Investors were assessing weak US employment data and speculating about potential interest rate adjustments from the Federal Reserve.

As talks regarding a ceasefire in Gaza persisted, the geopolitical risk premium in oil prices saw a reduction. However, the possibility of reaching a ceasefire agreement diminished as Hamas insisted on ending the conflict in the Strip in exchange for releasing hostages, while Israel hinted at an expansion of its operations in the region.

Analysts noted that Israel’s plans to intensify its operations in Rafah could disrupt ceasefire negotiations and reignite tensions in the Middle East, following a recent period of easing tensions.

Additionally, Saudi Arabia’s decision to raise the official selling price for its crude in June, particularly for markets in Asia, northwestern Europe, and the Mediterranean, further supported oil prices, reflecting expectations of increased demand during the summer months.