WTI and Brent rise as Israel-Lebanon tensions simmer

US crude oil posted its worst month of the year in May, but prices retreated on hopes that the market will tighten in summer fuel demand.

Here are the closing energy prices for Monday:

• August West Texas Intermediate contract: $81.63 a barrel, up 90 cents, or 1.11%. Year to date, US oil is up 13.9%.
• August Brent contract: $86.01 a barrel, up 77 cents, or 0.9%. Year to date, the global benchmark is ahead by 11.6%.
• RBOB Gasoline July contract: $2.51 per gallon, little changed. Year-to-date, gasoline is up 19.4%.
• July natural gas contract: $2.81 per thousand cubic feet, up 3.92%. Year to date, gas is up 11.8%.

“However, the main reason behind the price increase is the growing confidence that global oil stocks will inevitably fall during the Northern Hemisphere summer,” Tamas Varga, an analyst at oil broker PVM, said in a note on Monday.

Ryan McKay, senior commodities strategist at TD Securities, said supply risks are now back in focus as tensions rise on the Israel-Lebanon border. Israel and the Iran-backed Hezbollah militia group have traded threats of war in recent weeks.

Prime Minister Benjamin Netanyahu said Israel would redeploy forces to the north of the country as the intensive phase of the Gaza war ends.

“A renewed increase in our energy supply risk indicator may further support near-term price action,” McKay told clients in a note on Monday, but the strategist argued that funds would begin to liquidate long positions if WTI falls below 81 dollars per barrel.

Ukrainian President Volodymyr Zelenskiy claimed on Monday that Kiev had hit more than 30 Russian oil refineries, terminals and bases, without giving a time frame for when the attacks took place.

Goldman Sachs, JPMorgan and Citi forecast that inventories should start to fall based on OPEC+ fuel demand, maintaining production cuts until October.

U.S. crude, gasoline and distillate inventories fell for the week ended June 14, the latest data available. JPMorgan said gasoline consumption rose to 9.4 million barrels per day in the same week, the highest since the pandemic ended.