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Crude oil futures rose more than 1% on Thursday as growing concerns about geopolitical risk and expectations of third-quarter shortages outweighed a surprise rise in U.S. crude and gasoline inventories.
Cross-border tensions between Israel and Hezbollah in Lebanon have escalated The crisis is escalating and fueling fears of a widening war, and analysts say any contagion could hit Middle East crude supplies.
Oil prices appear headed for their first monthly gain since March, but remain “stuck within a range,” said FXTM analyst Lukman Otunuga. market clock. “The bulls have been supported by geopolitical tensions and hopes for a rebound in demand thanks to the summer driving season.”
Nymex front-month crude (CL1:COM) for August delivery settled +1% at $81.74 a barrel, and August Brent crude oil (CO1:COM) due next month closed +1.3% at $86.39 a barrel.
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Citi analysts say renewed tensions in the Middle East and Russia-Ukraine offer potential for a rise in oil prices, and that balances would need to loosen significantly before there is any significant downward pressure.
But oil markets this year have shown a propensity to overshoot “either on geopolitical fears or supply and demand expectations, before recalibrating dramatically afterwards,” Citi said, so “we recommend not chasing this rally as current price levels appear too high to us.”
Citi still forecasts an average third-quarter oil deficit of 200,000 barrels/day, but sees uncertainty around China as refinery operations there have been revised downward.
“What is also striking is that the key catalysts for the health of the summer oil markets, namely a strong pull from the east of Suez and a hot gasoline market, appear rather muted so far, perhaps underscoring the fragile nature of the current bullish sentiment,” the bank said. saying.