By Scott DiSavino
(Reuters) -Oil prices rose about 2% on Monday to a two-month high on hopes of rising demand during the Northern Hemisphere summer season and concerns that conflict in the Middle East could spread and could reduce global oil supplies.
futures rose $1.60, or 1.9%, to settle at $86.60 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.84, or 2.3%, to $83, 38.
That was the highest close for Brent since April 30 for the third day in a row and the highest for WTI since April 26.
“The (energy) complex starts this new week on a strong note as it continues to gain support from… a rising geopolitical risk premium related to tensions between Israel and Hezbollah (and) rising demand expectations for this month with a slightly increased hurricane premium,” they say analysts at energy consultancy Ritterbusch and Associates in a note.
Israel and the Iran-backed Hezbollah have been exchanging fire since the start of the Gaza war, and concerns are growing that an all-out war could break out between the two sides.
“Hezbollah and Israel appear to be moving closer to a full-scale war, which risks drawing in OPEC member Iran and its Shiite allies in Iraq, Yemen and Syria,” said Bob Yawger, director of energy futures at Mizuho. a note.
OPEC is the Organization of the Petroleum Exporting Countries (OPEC), which along with its allies, a group known as OPEC+, has already extended most of its oil production cuts until 2025.
These production cuts have led analysts to predict supply shortages in the third quarter as transportation and air conditioning demand deplete fuel supplies during the summer.
Rising fuel demand helped lift prices for U.S. oil products by about 3% on Monday, with diesel futures closing at a 10-week high and gasoline futures at an eight-week high.
In the Caribbean Sea, Hurricane Beryl, an extremely dangerous major hurricane, was expected to pass Jamaica on Wednesday and encounter Mexico’s Yucatan Peninsula on Friday before weakening to a tropical storm and hitting the Bay of Campeche in the Gulf of Mexico intrude. Mexico produces much of its oil on Saturday.
INFLATION DATA
So far this week, the market received data showing that U.S. output contracted for a third straight month in June as demand remained subdued, while a decline in prices paid by factories for inputs suggested a six-month low that inflation could continue to rise. to disappear.
As the week progresses, investors will look for more signs that the US Federal Reserve will cut interest rates.
The market will first focus on Fed Chair Jerome Powell’s comments on Tuesday, followed by the release of the minutes of the US central bank’s latest policy meeting on Wednesday and US non-farm payrolls data on Friday.
The Fed aggressively raised rates in 2022 and 2023 to curb the rise in inflation. Higher interest rates pushed up borrowing costs for consumers and businesses, which could slow economic growth and reduce demand for oil.
Hopes for a Fed rate cut and rising political concerns in Europe and between Israel and the Lebanese Hezbollah group have also kept a floor under prices, Tony Sycamore, an analyst at financial services firm IG, said in a note.
In France, opponents of the country’s far-right movement tried to build a united front to block the path to Marine Le Pen’s National Rally (RN) government after it made historic gains in the first round of early parliamentary elections to win.
