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(Bloomberg) — Oil traded near a two-month high after breaking out of its recent trading range on an escalation in tensions in the Middle East and concerns over the rapid start to the Atlantic hurricane season.
Brent crude traded near $87 a barrel after rising Monday, while West Texas Intermediate was above $83. Israel’s military said 18 soldiers were injured in a drone attack by Iran-backed Hezbollah, one of them seriously, threatening to move the conflict closer to a full-scale war.
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Meanwhile, Hurricane Beryl made landfall on Carriacou Island in the Caribbean as a category 4 storm, raising concern that such a severe system this early in the year may portend a serious hurricane season, which is still months away from its typical peak.
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 biggest crude importer — are likely to limit price increases.
“The breakout of the recent range to a new higher high reinforces the near-term upward trend,” said Yeap Jun Rong, market strategist for IG Asia Pte. That “could leave buyers eyeing for a retest of the April 2024 high next at the key $90 level” for Brent.
Increased trading in crude futures has lifted implied volatility, with a gauge for Brent moving to near the highest in a month. Money managers have been piling back into oil and refined products including diesel, and timespreads remain in a bullish backwardation structure.
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