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West Texas Intermediate (WTI) climbed over 2.3% on Monday as rising tensions in two conflict zones outweighed supply and demand fundamentals that should have put downward pressure on crude prices.
At 12:37 p.m. ET on Monday, WTI was up 2.59%, trading at $75.31, for a $1.90 gain on the day, while Brent crude was up 1.90%, trading at $80.05, for a $1.49 gain on the day.
Overall, weakening demand and slowing economic growth have kept oil prices from soaring on geopolitical developments, Wednesday’s gains reflect an intensification of Israel’s war in Gaza, rising tension across the Middle East, new developments on the Russia-Ukraine battlefield, and continued attacks on shipping in the Red Sea.
This week has seen some of the most intense fighting in Gaza since the October 7 Hamas attack on Israel, with the Israelis targeting two hospitals and advancing into a coastal district in southern Gaza, Reuters reports.
The intensification of the conflict prompted the European Union’s foreign policy chief, Josep Borrell, to say on Monday that Israel’s goal of destroying Hamas in Gaza was failing and the only way out of this conflict is a peace deal involving a two-state solution.
Also putting upward pressure on oil prices is new momentum in the Russia-Ukraine conflict, where a drone attack on a Russia fuel export terminal run by Russian Novatek on the Baltic Sea caused a fire that led to shutdown of operations.
Fundamentals, however, continue to keep a lid on rising prices, with higher oil production and a mixed bag in terms of growth outlook subduing the impact of geopolitical developments.
IG analyst Tony Sycamore told CNBC that “production is higher and the growth outlook in China and Europe is mixed at best, while GDP data this week is expected to show the velocity of the U.S. economy has slowed considerably”.
By Tom Kool for Oilprice.com
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Tom majored in International Business at Amsterdam’s Higher School of Economics, he is Oilprice.com's Head of Operations