Brent settles above $90 for first time since October

Oil prices extended gains on Thursday, settling up more than $1 as geopolitical tensions and output cuts outweighed caution about US Federal Reserve rate cuts.

Brent futures for June rose above $91 a barrel before settling up $1.30, or 1.5 per cent, to $90.65. US West Texas Intermediate (WTI) futures for May ettled up $1.16, or 1.4 per cent to $86.59 a barrel.

Middle East tensions

Both contracts closed on Thursday at their highest levels since October and continued to climb after the session ended, having received support in recent days from heightened geopolitical tensions and potential supply risks.

Oil rose on Thursday following news reports that Israeli embassies across the world have been placed on high alert due to increasing threats.

US stance

In a sharp shift in tone, Washington issued its strongest public rebuke toward Israel on Thursday since the start of its conflict with Hamas, warning that US policy on Gaza will be determined by whether Israel takes steps to address the safety of Palestinian civilians and aid workers.

The US on Thursday imposed new Iran-related sanctions against Oceanlink Maritime DMCC and its vessels, citing its role in shipping commodities on behalf of the Iranian military.

Ukraine

Prices were also supported after US Secretary of State Antony Blinken said that Ukraine will eventually join NATO as support for the country remains “rock solid” among member states.

Oil’s recent gains have also followed in the wake of ramping of recent Ukraine-Russia tensions which has cut fuel supply and news that Mexico’s state energy company Pemex requested its trading unit to cancel up to 436,000 barrels per day of crude exports this month as it prepares to process domestic oil at the new Dos Bocas refinery.

“All of these geopolitical factors happened at once, driving bullish sentiment and ultimately some profit taking,” said Frank Monkam, senior portfolio manager at Altimo LLC.

OPEC+ meeting on oil supply policy

A meeting of top ministers from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) including Russia, kept oil supply policy unchanged on Wednesday and pressed some countries to boost compliance with output cuts.

The group said some members would compensate for oversupply in the first quarter. It also said Russia would switch to output rather than export curbs.

Investors will look to economic data and monetary policy for potential clues on the outlook for oil demand.

US Fed

US unemployment claims increased more than expected in the last week, according to Labor Department statistics, as labor market conditions gradually ease.

That came after Federal Reserve Chair Jerome Powell expressed caution on Wednesday about the timing of future interest rate cuts, after recent data has showed higher-than-expected job growth and inflation.

March’s employment report on Friday is likely to show non-farm payrolls increased by 200,000 jobs in March after rising by 275,000 in February, according to a Reuters survey.