Oil extended gains as another attack on a ship in the Red Sea added to heightened geopolitical tensions in the Middle East ahead of an OPEC+ meeting.

Brent futures rose near US$85 after ending 1.4 per cent higher on Tuesday, while West Texas Intermediate traded above $80. A ship was hit by missiles for a second time while sailing through the Red Sea yesterday, while Israeli tanks have reached the center of the southern Gazan city of Rafah in its ground invasion.

Oil has risen this year due to tensions across the Middle East and output cuts by the Organization of the Petroleum Exporting Countries and its allies. Still, gains have been muted given the potential risks of wider war in the Middle East and prices have softened since early April because of abundant supply outside OPEC+. The producers’ group will hold an online meeting Sunday and is expected to roll over its curbs into the second half of 2024.

“Traders are likely following the momentum in the market and don’t want to get caught out short in case there are any surprises next week,” said Giovanni Staunovo, a commodity strategist at UBS Group AG. “Oil demand growth is healthy and the fundamentals are solid enough to support prices.”

Still, that doesn’t mean the biggest producers aren’t facing challenges in managing the market. OPEC+ faces a darkening outlook in China as flagging factory strength and a housing crash reduce demand for plastics and fuels used in construction. The Asian nation has also curbed some crude purchases from the de-facto leaders of the alliance — Saudi Arabia and Russia.

In the U.S., Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank’s policy stance is restrictive but policymakers haven’t entirely ruled out additional interest-rate hikes. Fed policymakers are widely expected to keep rates at a 23-year high when they meet June 11-12 in Washington.


  • Brent for July settlement rose 0.9 per cent to $85.02 a barrel at 11:07 a.m. in London.
  • WTI for July delivery gained one per cent to $80.60 a barrel