Oil prices hold firm as traders watch Israel-Lebanon tensions, summer demand

Crude oil futures were little changed Tuesday as the recent rally took a breather, with traders watching for summer fuel demand and tensions on the Israel-Lebanon border.

U.S. crude oil and global benchmark Brent are ahead by 6% and 5.3%, respectively, for the month as prices have bounced back from May doldrums on a more optimistic outlook for summer fuel demand.

But the oil market fell flat Tuesday as prices failed to maintain upside momentum, with funds liquidating recently acquired long positions, according to Ryan McKay, senior commodity strategist at TD Securities.

Here are today’s energy prices:

• West Texas Intermediate August contract: $81.65 per barrel, down 1 cent. Year to date, U.S. oil has gained 13.9%
• Brent August contract: $85.84 per barrel, down 8 cents. Year to date, the global benchmark is ahead by 11.6%.
• RBOB Gasoline July contract: $2.52 per gallon, up 0.57%. Year to date, gasoline is up 20%.
• Natural Gas July contract: $2.77 per thousand cubic feet, down 1.35%. Year to date, gas is up 10.3%.

Though the rally has taken a breather, geopolitical tensions should prevent another rout in oil prices, as tensions between Israel and Lebanon raise the risk of a disruption to crude supplies, according to McKay.

Israel and the Iran-backed militia Hezbollah have threatened war in recent days after trading fire across the Lebanon border for months. Air Force General Charles Q. Brown, the top U.S. military officer, warned Sunday that OPEC member Iran “would be more inclined to support Hezbollah” if Israel launched an offensive in Lebanon.

“A renewed increase in our energy supply risk indicator can support price action in the near term, but ultimately we still argue the upside is likely capped by increasing global supply and potential OPEC+ increases, which puts 2025 balances in question,” McKay said in a Tuesday note.

Oil prices hit annual highs in April as Israel and Iran teetered on the brink of war, stoking fears that a wider conflict could engulf the Middle East and disrupt crude supplies. Prices subsequently pulled back as tensions eased.

“Oil markets have so far been immune to the fallout of the Gaza invasion,” John Evans, analyst at oil broker PVM, told clients in a note Tuesday.

“However, at a time when there is an expectation of higher-to-be numbers in oil prices, such a sweeping under the carpet of the wider considerations of the conflict is starting to run out of space,” Evans said.

Brent prices above $85 per barrel could be the start of more upward pressure on prices as geopolitical risk and bullish fundamentals converge, said Claudio Galimberti, director of global market analysis at Rystad Energy.

U.S. crude oil, gasoline and distillate stockpiles all fell during the week ending June 14 in a sign of strengthening demand. Analysts expect there was an even bigger crude oil draw of 3 million barrels last week, according to a Reuters poll. The Department of Energy releases official data Wednesday.