Oil prices rise following Saudi Arabia’s price increase

Oil futures climbed on Monday as Saudi Arabia raised June crude prices for most regions and the possibility of a Gaza ceasefire deal seemed unlikely, sparking fears of escalating tensions in the key oil-producing region.

Brent crude futures rose by 0.4% to $83.30 a barrel, while U.S. West Texas Intermediate crude futures were up by the same percentage to $78.45 a barrel. Saudi Arabia’s decision to increase the official selling prices (OSPs) for its crude sold to Asia, Northwest Europe, and the Mediterranean in June indicated expectations of strong demand this summer.

Despite a slight dip in oil prices last week due to easing geopolitical tensions, ICE Brent started the new trading week on a stronger note. In China, the world’s largest crude importer, services activity remained in expansionary territory for the 16th consecutive month, boosting hopes of a sustained economic recovery.

However, the prospect of a Gaza ceasefire deal appeared slim as Hamas reiterated its demand for an end to the war in exchange for the release of hostages, a demand Israeli Prime Minister Benjamin Netanyahu rejected. This raised concerns of reigniting Middle Eastern geopolitical tensions.

With most long positions in oil cleared last week, the risks point towards WTI prices rebounding towards $80 in the early part of this week. Additionally, U.S. energy companies reduced the number of oil and natural gas rigs operating for the second consecutive week, indicating a potential tightening of supply.

Overall, the oil market remains volatile as geopolitical tensions and supply concerns continue to impact prices.