Quantum Commodity Intelligence – Crude oil futures opened the week marginally higher, rebounding from seven-week lows amid fading hopes for a Middle East ceasefire deal, while higher Saudi OSPs also improved sentiment.
Front-month Jul24 ICE Brent futures were trading at $83.27/b (1820 GMT), compared to Friday’s settle of $82.96/b, having tumbled around 6% last week.
At the same time Jun24 NYMEX WTI was trading at $78.44/b versus Friday’s settlement of $78.11/b.
The latest round of talks for a ceasefire/hostage deal failed to find common ground between Israel and Hamas, with both sides accusing the other of making unreasonable demands.
But prices eased from highs later in the session on reports that Hamas was ready to accept the deal, but the initial reaction from the Israeli side was one of skepticism, with officials saying the deal was not the one on the table.
The broader de-escalation in hostilities was one of the primary reasons for the price slide, which has seen benchmarks slide around 10% from the April peaks.
“The sharp drop reflects in part the removal of the war risk premium,” said City Index analyst Fawad Razaqzada. “Still, following the recent correction, the downside could be limited from here on. For one thing, there is still the risk of the Middle East conflict intensifying again.”
Failure of ceasefire talks could also see an increase in Houthi attacks against commercial shipping, with the Yemini-based militants warning over the weekend that it could extend their attacks beyond the Red Sea and Gulf of Aden.
Houthi military spokesperson Yahya Sarea was quoted by regional media saying, “We will target any ships heading to Israeli ports in the Mediterranean, in any area we are able to reach.”
OSPs
Meanwhile, prices also found support after Saudi Aramco increased its OSPs for Asia, including its flagship Arab Light crude priced at Platts Dubai/DME Oman +$2.90/b, up from +$2/b in April.
This was the highest OSP in five months, and although largely in line with expectations, it was seen as a signal that Saudi Arabia is confident of placing contract volumes next month, with the heavier barrels typically produced by the Kingdom commanding higher premiums.
Meanwhile, OPEC has published plans for Iraq and Kazakhstan to compensate for overproduction during the first quarter, when the two countries pumped a combined volume of around 330,000 bpd above the agreed ceiling.
OPEC said in a statement Friday that Iraq had overproduced by around 200,000 bpd in Q1, pumping a cumulative 18 million barrels over its agreed quota.
By way of compensation, the plan is for Iraq to reduce output by 50,000 bpd May through Sept, 100,00 bpd in Oct/Nov and 152,000 bpd in Dec – adding up to 18 million barrels.
