Oil prices are poised to register a gain of over 5% this week as the conflict in the Middle East continues unabated. The tensions escalated after Israel rejected a ceasefire offer from Hamas, leading to a steady increase in oil prices. Brent crude futures slightly declined by 0.25% to reach $81.43 a barrel, while U.S. West Texas Intermediate crude futures fell by 0.12% to $76.13 a barrel.
The ongoing Israeli airstrikes on Gaza, including the recent bombing of Rafah, have contributed to a 3% surge in oil prices during the previous session. The situation is unlikely to be resolved anytime soon, as UBS analyst Giovanni Staunovo pointed out, It takes two to tango to reach a ceasefire deal in the Middle East, and tensions in the region have not gone away.
Israeli Prime Minister Benjamin Netanyahu’s rejection of a proposal to end the war further pushed Brent futures prices above $81 a barrel. PVM analyst John Evans emphasized, With the words that ‘no part of the Gaza Strip would be immune from Israel’s offensive,’ it was not hard for oil participants to conclude that without even a passing regard for peace, there was not enough conflict-premium priced in.
In addition to the Middle East conflict, Ukraine launched drone attacks against two oil refineries in southern Russia, resulting in a fire at the Ilsky refinery. This incident, along with technical outages at other Russian refineries, has led Russia to export more crude in February than planned under the OPEC+ agreement. Commerzbank analyst Carsten Fritsch remarked, Proof still needs to be provided that Russia is able to cut oil exports sufficiently even without weather-related constraints.
Meanwhile, the U.S. Treasury Department has imposed sanctions on three entities based in the United Arab Emirates and one tanker registered by Liberia. These entities and the tanker violated the price cap placed on Russian oil by a coalition of Western nations.
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