Oil Climbs Near Five-Month High as Traders Focus on Middle East
Oil Climbs Near Five-Month High as Traders Focus on the Middle East – Oil traded near a five-month high as investors considered simmering Middle Eastern tensions and ongoing supply concerns.
Brent surged toward $91 per barrel after closing 0.9% lower on Monday, the first drop in five sessions. West Texas Intermediate traded below $87. Israel stated progress had been made in discussions for a cease-fire in Gaza, indicating a possible easing of hostilities, but Hamas refuted the report.
The market is also anticipating Iran’s response to a suspected Israeli attack on its consulate in Syria last week. Hezbollah has warned that it is ready for war.
The broader picture remains bright, with some predicting $100 oil as OPEC+ maintains output cutbacks. On Friday, the options market showed its strength by buying the most bullish call options for Brent — which benefit when prices climb — since 2019. Money managers have also been expanding their long positions on the worldwide benchmark.
“The market is pricing in firmer growth and increased geopolitical risks,” Goldman Sachs Group Inc. analysts Yulia Grigsby and Daan Struyven said in a report on April 8. The majority of the recent gain is attributed to “this increase in speculative positioning and the shift from under-priced time spreads earlier this year to moderate overpricing,” they stated.
This week, traders will need to analyze a number of studies that will provide a glimpse of the supply and demand forecast, including monthly releases from OPEC and the International Energy Agency.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, known as OPEC+, maintained their oil supply policy this week while urging some countries to strengthen cooperation with output curbs.
“Further restrictions on quota adherence should cause output to fall further in Q2,” ANZ analysts Daniel Hynes and Soni Kumari said in a note.
“The prospect of a tighter market should see a drawdown in inventories during the second quarter.” Meanwhile, U.S. job growth skyrocketed in March, comfortably above expectations, according to official statistics released on Friday, which also showed a consistent increase in earnings.
JPMorgan analysts predicted that global oil demand will increase by 1.4 million barrels per day (bpd) in the first quarter. U.S. energy companies reduced the number of oil and natural gas rigs in operation for the third week in a row, the first time since October, according to a highly watched report released on Friday by energy services firm Baker Hughes.
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