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Crude oil futures climbed ~2% to two-month highs Monday in anticipation of rising demand in the Northern Hemisphere’s summer driving season and worries that conflict in the Middle East could spread and reduce global oil supplies.
A drone attack from Hezbollah injured 18 Israeli soldiers on Sunday, as conflict between the two groups continues to escalate, alongside the continuing war in Gaza.
“Hezbollah and Israel seem to be drifting closer and closer to a full scale war that runs the risk of drawing in OPEC member Iran and its Shiite allies in Iraq, Yemen and Syria,” Mizuho’s Bob Yawger wrote in a note.
Front-month August WTI crude topped $83/bbl, also helped by “just in case” buying ahead of Hurricane Beryl in the Caribbean Sea.
Although weather experts say the storm is not likely to hit U.S. oil operations in the Gulf of Mexico, such a severe storm this early in the year may portend a serious hurricane season to come.
“The prospect of an early and active tropical storm season may demand a larger amount of storm premium than usual into the fall contracts,” according to analysts at Ritterbusch.
Front-month contracts tallied their fourth straight daily gains, with September Nymex crude (CL1:COM) closing +2.2% to $83.38/bbl, its highest settlement value since April 26, and September Brent crude (CO1:COM) settling +1.9% to $86.60/bbl, the benchmark’s best close since April 30.
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Rising demand for fuel also helped lift prices for U.S. refined products, with front-month August ULSD futures (HO1:COM) +3.2% to $2.6147/gal, closing at their best level in 10 weeks, and front-month August RBOB gasoline (XB1:COM) for August delivery closing +3% to $2.5783/gal, its highest in eight weeks.
AAA predicts that more than 60M people will drive more than 50 miles during the July 4 holiday travel week, 2.8M more than last year.