Oil gains on rising Middle East tensions

May 29, 2024 (MLN): Oil extended gains following another attack on a ship in the Red Sea, further escalating geopolitical tensions in the Middle East ahead of the upcoming OPEC+ meeting.

Brent crude rose to $84.42 per barrel after closing 1.4% higher yesterday.

While West Texas Intermediate crude (WTI) traded near $80.13 per barrel.

A bulk carrier has taken on water after being attacked while sailing through the key waterway, while Israeli tanks have reached the center of the southern Gazan city of Rafah in its ground invasion, as Bloomberg reported.

Oil has climbed this year due to tensions across the Middle East and output cuts by the Organization of the Petroleum Exporting Countries and its allies, although prices have softened since early April because of abundant supply outside of the group and weaker demand in Asia.

OPEC+ is set to meet online on Sunday and expected to roll over its curbs into the second half of 2024.

“Geopolitical tensions continue to overshadow the market, but until we see supply losses, I think upside is limited,” Warren Patterson, head of commodities strategy for ING Groep NV in Singapore.

“We need to see confirmation of a full rollover of cuts for the market to move significantly higher,” Warren added.

In the US, Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank’s policy stance is restrictive but policymakers haven’t entirely ruled out additional interest-rate hikes.

Fed policymakers are widely expected to keep rates at a 23-year high when they meet June 11-12 in Washington.

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