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Brent crude settled above $90 a barrel for the first time since October, as tensions in the Middle East threaten to spill over into a wider regional war.
Crude oil prices for an increase in geopolitical risk following news on the presence of Israeli embassies placed on alert amid growing threats of an attack by Iran, which has vowed revenge for this week’s Israeli strike in Syria that killed high-ranking Iranian military personnel.
The United States has issued its harshest public rebuke of Israel since the war with Hamas began, with President Biden calling for an immediate ceasefire in Gaza and further measures by Israel to ensure the safety of Palestinian civilians and humanitarian workers; Earlier this week, an Israeli strike killed seven aid workers in what Prime Minister Netanyahu called a tragic mistake.
In a phone call today, Biden “made clear that U.S. policy with respect to Gaza will be determined by our assessment of Israel’s immediate action on these steps,” the White House said in a statement, signaling for the first time that The United States may reevaluate supporting Israel’s war against Hamas.
Crude oil also found support from tightening global supplies and signs of strong fuel demand from the United States, which pushed prices higher on Wednesday.
Nymex Front-Month Crude (CL1:COM) for May deliveries is closed +1.3% at $86.59/barrel, and first-month June Brent crude (CO1:COM) ended +1.4% at $90.65 a barrel, the fifth consecutive daily gain and the highest liquidation value since October 20 for both benchmarks.
Meanwhile, U.S. natural gas futures fell as domestic inventories remained nearly 40% above the five-year average, with Nymex natgas (NG1:COM) expected to be delivered near May. -3.6% at $1.774/MMBtu.
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The oil price rally puts Brent crude within reach of $93-95, given the extension of OPEC+ production cuts and the perceived risks of Iranian supply being affected by the conflict in the Middle East, although it appears Strong resistance at that level is likely as it could prompt producers to sell forward and speculators to take some profits, Citi analysts said.
But Citi remains bearish for 2025, forecasting demand growth will slow to less than 1 million barrels per day as the post-COVID jet fuel recovery loses momentum and the uptake of electric vehicles becomes more visible.
“We continue to see an inflection from a bull market to a bear market by mid-year,” Citi said.