Oil prices edged higher on Monday in Asian trade amid a waning possibility of a Gaza ceasefire, while tighter supplies are expected due to a potential drop in US inventories and fuel disruptions.
June contract Brent crude oil futures gained 0.61% to $85.35 per barrel, while the US West Texas Intermediate (WTI) crude futures expiring in May climbed 0.63% to $81.14 per barrel.
Crude prices retreated from four-month highs in the week earlier amid increased hopes for a temporary ceasefire between Israel and Hamas during the Muslim holy month of Ramadan.
However, the US-led resolution was rejected by Russia and China on Friday to maintain an impasse in the United Nations (UN) Security Council over the war.
A potentially tighter outlook has allowed for a four-month high and positive trading in oil prices earlier in March and 2024 so far, respectively.
Oil also weakened on the dollar’s surge, although the losses were curbed by a tighter view of the crude market this year, and growth in the world’s largest economy offered optimism for demand.
UN to Vote Alternate Ceasefire Deal, Tighter Outlook Remains
The UN Security Council is set to decide on an alternative ceasefire proposal in the Gaza Strip linked to a hostage deal later in the day.
The resolution was quickly put forward after Russia and China vetoed the arrangement headed by the US, which was presented amid the country’s officials urging Israel to ease its assault on Gaza and Palestine.
Israeli Prime Minister Benjamin Netanyahu stated on Friday that they would proceed with a new attack against the southern Gaza city of Rafah, where more than a million displaced Palestinians have taken refuge.
Signs of a de-escalation in the fighting may help alleviate fears over geopolitical instability in the Middle East, potentially disrupting the region’s crude supplies. Such a view has been a crucial driver of oil prices in recent months.
As regards supply, Russia saw lower fuel production after Ukraine’s drone attacks on several of its major refining facilities led its daily oil refining rate to a ten-month low of 5.03 million barrels per day (bpd) from March 14 to 20.
The Russia-Ukraine conflict is also not seen deescalating in the near term.
In the US, data from the Energy Information Administration (EIA) showed crude inventories dropped 1.95 million barrels for the week ended March 8, marking a steady slide. A steady decline in fuel stocks also showed better demand in the world’s top consumer.
