Brent heads for weekly gain as Israel rejects ceasefire proposal

Front-month ICE Brent has surged by $2.28/bbl on the day, to $81.58/bbl at 09.00 GMT. The futures contract is on track for a 5% gain over its settlement level last week.

PHOTO: Oil refinery and pipeline in the desert during sunset. Getty Images

Upward pressure:

Brent levels have moved higher this week after Israel rejected Gaza’s ceasefire offer. Israeli Prime Minister Benjamin Netanyahu called the offer “delusional” and vowed to fight until “absolute victory” over Hamas has been achieved. Since then, Israeli military operations in Gaza have intensified, with reports of bombings in Rafah yesterday, Reuters reported.

Oil market was hoping for a ceasefire agreement following multiple peace talks facilitated by Qatar and Egypt. The Israeli rejection has prompted market participants to increase their long positions in Brent futures, pushing crude spot prices higher, ANZ commodities strategist Daniel Hynes says.

It coincides with a worsening shipping situation in the Red Sea, Hynes points out. Escalating tensions have raised concerns about how the Houthi militia will respond, especially given its history of targeting vessels in the Red Sea in response to Israeli actions in Gaza.

Downward pressure:

Ukrainian drone attacks on several Russian oil infrastructure locations have dented the country’s refining capability, forcing Russia to export more unfinished crude oil to clear a growing crude stockpile, Reuters reported citing analysts. This could impact its pledge to curb crude oil exports under the OPEC+ deal.

Last year, Russia pledged to reduce its crude oil exports by 500,000 b/d during the first quarter of this year. Analysts suggest that Russia may find it difficult to adhere to this strategy because unrefined crude stocks have piled up and because its refining capacity has now become more constrained.

By Nithin Chandran

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