Oil steadied as positive sentiment across markets and signs of nearby strength countered indications of easing hostilities in the Middle East.

Brent traded above US$87 a barrel after slipping 0.3 per cent on Monday, and West Texas Intermediate hovered around $82. The U.S. dollar dipped, making commodities priced in the currency more appealing, while equities rose. Key timespreads also climbed, indicating stronger physical markets.

Geopolitical risks continue lingering over the market as Israel returns to its goals of eliminating what it says is the last remaining stronghold of Hamas in Gaza and of freeing the remaining hostages, which will keep tensions elevated.

Still, options markets have grown more sanguine in recent days about the risks of a price spike.

After a large bout of volatility, prices remain shy of $90 a barrel ahead of a summer period that normally is the peak demand season. That has many analysts expecting higher prices later this year, even after a recent small pullback in prices.

“The odds of this thing going over $100 are extraordinarily high,” Jeff Currie, chief strategy officer of energy pathways at Carlyle Group, said in an interview on Bloomberg Television. “The question is: How high can you get before you start to see OPEC begin to adjust the system? Timespreads don’t lie. They tell you that this market is tight.”

Futures are coming off back-to-back weekly losses but remain higher this year due to geopolitical risks and OPEC+ supply cuts that have tightened the market. The U.S. Congress has moved to further curb Iran’s oil sector, although analysts see a muted impact on exports.

Prices:

• Brent was 0.2 per cent higher at $87.17 a barrel at 10:51 a.m. in London.
• WTI added 0.1 per cent to $82.01 a barrel.