Oil nears two-month high amid Mideast, hurricane concerns

July 02, 2024 (MLN): Oil traded near a two-month high, breaking out of its recent trading range due to escalating tensions in the Middle East and concerns over the swift onset of the Atlantic hurricane season.

Brent crude traded near $86.83 per barrel, up by 0.27% on the day.

While West Texas Intermediate crude (WTI) was at $83.54 per barrel, up by 0.19% on the day.

Israel’s military said 18 soldiers were injured in a drone attack by Iran-backed Hezbollah, one of them seriously, threatening to move the conflict closer to a full-scale war, as Bloomberg reported.

Meanwhile, Hurricane Beryl has strengthened to category 5, the highest level on the Saffir-Simpson scale, becoming the strongest storm to ever form in the Atlantic at this time of the year.

The system earlier made landfall on Carriacou Island in the Caribbean and is headed toward Jamaica.

Oil is cementing last month’s gains, as OPEC+ keeps supply in check and travel picks up in the northern hemisphere summer, with traders likely to keep a close eye on gasoline demand around Thursday’s US Independence Day holiday.

Concerns over a struggling recovery in China — the biggest crude importer — are likely to limit price increases.

“The breakout of the recent range to a new higher high reinforces the near-term upward trend,” said Yeap Jun Rong, market strategist for IG Asia Pte. That “could leave buyers eyeing for a retest of the April 2024 high next at the key $90 level” for Brent.

Increased trading in crude futures has lifted implied volatility, with a gauge for Brent moving to near the highest in a month.

Money managers have been piling back into oil and refined products including diesel, and timespreads remain in a bullish backwardation structure.

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