Oil poised for weekly gain on heightened Middle East tensions

Oil headed for a weekly advance after Prime Minister Benjamin Netanyahu’s dismissal of a potential cease-fire in the Israel-Hamas war added bullish impetus to a market.

Brent crude traded near $82 a barrel, after climbing more than 3% on Thursday, the biggest daily jump in a month. The move of almost 6% this week has also been accompanied by gains in refining margins, indicating tighter fuel markets, and a surge in nearby gauges in the crude market that points to wider strength.

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Netanyahu said he sees “no other solution than total victory,” and threats by Iraq to pull support for the American-led coalition added to tensions in the major oil-producing region. Shipping companies also warned that the security situation in the Red Sea continues to deteriorate.

“It’s been a bumper week for oil prices this week, as hopes of easing tensions in the Middle East failed to receive much-needed validation,” said Yeap Jun Rong, market strategist for IG Asia Pte. “Market participants are pricing for geopolitical risks to linger for longer.”

Aiding the firmer outlook for crude this week have been a string of more positive market indicators. In the US, the premium of gasoline over crude increased to the highest since September after nationwide inventories declined. In diesel markets traders continue to watch Ukrainian drone attacks on Russian refineries, while a fire broke out at another Russian site on Friday.

Meanwhile in Europe there’s been buying in a key North Sea pricing period, indicating a stronger crude market in the region. That helped push Brent’s prompt spread — a gauge of nearby market health — to its biggest daily gain since October.

Prices:
  • Brent for April settlement was steady at $81.63 a barrel at 10:31 a.m. in London.
  • WTI for March delivery was rose 0.1% to $76.31 a barrel.

© 2024 Bloomberg

William Murphy

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