May 6th saw an increase in oil futures as a result of Saudi Arabia’s decision to raise June crude prices across the board and the fading hope of a swift ceasefire accord for Gaza, which has reignited concerns that fighting between Israel and Hamas may break out again shortly.
Historically, Saudi Arabia has been considered the world’s leading oil swing producer, able to influence oil prices via output spikes and dips.
As of 11 am (CDT), Brent oil futures were trading at $83.65 per barrel, up 69 cents, while West Texas Intermediate (WTI) crude oil futures were at $78.89 per barrel, up 78 cents.
As investors considered disappointing U.S. employment statistics and the potential timing of an interest rate decrease by the Federal Reserve, both futures contracts had their worst weekly decline in three months last week. WTI fell 6.8%, and Brent fell over 7%.
The likelihood of a truce in the Gaza Strip diminished as Israel seemed ready to start a long-promised attack in the southern Gaza Strip, and they restated their demand for the release of captives in return for the end of the conflict.
Israeli forces launched a limited-scope operation on Monday, urging Palestinian residents to leave Rafah.
According to Israeli government spokesperson David Mencer, the Israeli warning to Rafah inhabitants to leave was not a bluff and signified the start of the long-talked-about offensive launched by the Israel Defense Force (IDF) to prevail in the war. This statement was made on May 6th. Israeli forces will free Gaza from Hamas, he said.
According to Again Capital partner John Kilduff, markets have become somewhat cynical about the geopolitical risks associated with the conflict. In his opinion, the markets will not move until more dynamic activity occurs.
Kilduff said that Monday’s market responses were muted since news broke that discussions between Israel and Hamas were ongoing after a weekend of the failed accord.
For June, Saudi Arabia raised its official selling prices of its crude oil shipped to Asia, Northwest Europe, and the Mediterranean, a move that supported oil prices since it signaled expectations of robust demand this summer.
China is the world’s biggest importer of crude oil; new orders have grown, and business confidence has surged, giving optimism for a long-term economic recovery.