Oil prices surge on Saudi confidence amidst tensions in the Middle East

Oil prices rebounded today following a recent dip, with Saudi Arabia’s decision to increase prices for its Asian grades for the third consecutive month indicating confidence in the market outlook. Brent crude edged closer to $84 a barrel after experiencing a more than 7% decline last week, its largest drop since February, while West Texas Intermediate hovered around $79. Saudi Aramco raised the official selling price of its flagship Arab Light grade for June by 90 cents to $2.90 a barrel above benchmark prices, surpassing the 60-cent increase forecasted in a Bloomberg survey.

Last week, oil prices dipped amidst reduced tensions in the Middle East, offsetting some of the gains made earlier this year. However, the OPEC+ alliance is expected to maintain its supply cuts in the second half of the year, a move likely to support prices. Iraq and Kazakhstan have already outlined plans to reduce output in line with agreed-upon quotas.

 

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In other news from the region, Israel has initiated the evacuation of civilians from Rafah, possibly in anticipation of an attack on the Gaza city. Talks over a potential truce between Israel and Hamas in Cairo over the weekend ended without a clear resolution.

Options markets have shown decreased concern about the possibility of a broader regional conflict, with Brent skewing bearishly for the first time in almost two months. Additionally, trading volumes are expected to be lower today due to a holiday in London.

Although the prompt spread for Brent crude has narrowed in recent weeks, the market structure remains in a positive, backward state, with near-term barrels commanding a higher price than those further out. The spread currently stands at 53 cents per barrel, down from 93 cents two weeks ago.

For the latest updates on oil prices, you can check HF Markets.