Oil Touches Two-Month High On Mideast Turmoil, Hurricane Season

Storage tanks at the West Indies Oil Company terminal in St. John's, Saint John Parish, Antigua, Saturday, April 22, 2023. Antiqua is part of a twin-island nation lying between the Caribbean Sea and the Atlantic Ocean consisting of two major inhabited islands and a number of smaller islands. Photographer: Bing Guan/Bloomberg

(Bloomberg) -- Oil touched a two-month high as tensions escalate in the Middle East and the Atlantic hurricane season gets off to a rapid start.

West Texas Intermediate climbed as much as 1.2% to top $84 a barrel and reach highest intraday price since April 26 before paring gains and trading little changed. That followed an advance of more than 2% on Monday that broke crude out of its recent trading range.

Israel's military said 18 soldiers were injured, one of them seriously, in a drone attack by Iran-backed Hezbollah, threatening to widen the conflict. Israel also is continuing its siege on Gaza, ordering Palestinians to leave the city of Khan Younis ahead of a potential attack.

In the Americas, Hurricane Beryl has strengthened to Category 5 — the highest level on the Saffir-Simpson scale — becoming the strongest storm to ever form in the Atlantic at this time of the year. While there's only a 30% to 40% chance that a weakened Beryl will hit the upper Gulf of Mexico, where US offshore operations are located, the record-setting storm may be a harbinger of a supply-roiling season to come.

Oil is cementing last month's gains as OPEC+ keeps supply in check and travel picks up in the northern hemisphere summer, with traders likely to keep a close eye on gasoline demand around Thursday's US Independence Day holiday. Concerns over a struggling recovery in China — the world's biggest crude importer — may limit price increases, and oil has edged into overbought territory, which also can restrain gains.

“We can still see further legs up, at least to the highs of 2024, but we need to take it to another fundamental level to break out of this consolidation,” said Forex.com market analyst Razan Hilal.

If the US Federal Reserve indicates tomorrow that rate cuts are coming this year, markets will react with “euphoric sentiment,” she added. Federal Reserve Bank of Chicago President Austan Goolsbee said the Fed has a case for cuts after a key indicator showed inflation cooling.

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