Oil Prices Rally on Middle East Tensions, But Gains Limited

Oil prices rose on Monday due to a lack of progress in diplomatic efforts to resolve the Middle East conflict. Brent crude futures were up 34 cents, or 0.38 per cent, at $88.86 a barrel by 1202 GMT after hitting a session high of $89.68.

U.S. West Texas Intermediate crude futures rose 4 cents or 0.05 per cent to $82.44 a barrel. Both contracts gained more than 5 per cent last week following attacks on tankers operated by the Abu Dhabi National Oil Company in the Hormuz strait and on a Saudi Aramco refinery.

Bjarne Schieldrop at SEB Research said that prices were unlikely to move substantially higher unless there was a halt in the current flow of crude out through the Strait of Hormuz at night and/or a closure of the Bab el-Mandeb Strait. For now, prices were trading close to $90 as traders weigh the risk of deeper disruption and shortages against the possibility of a resolution where the Strait of Hormuz is reopened and oil prices fall sharply.