Benchmark Oil Futures Settle Higher

WASHINGTON (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange rallied on Thursday. The better-than-one-week high settles by benchmark crude futures were fueled by concerns of military conflict in the Middle East after Saudi Arabia launched a retaliatory strike against Houthi rebels in Yemen.

West Texas Intermediate gained 1.69% on Thursday to settle at $62.87 per barrel (bbl), while Brent advanced $0.85 to settle at $72.62 bbl. NYMEX June RBOB futures surged 4.91 cents to $2.0618 gallon settlement and June ULSD futures advanced 3.69 cents to settle at $2.1232 gallon.

Oil futures continue to draw support from the risk of military conflict in the Middle after Saudi Arabia accused Iran of ordering the attack on its key oil pipeline. Saudi Aramco said on Thursday it restarted crude flow through its main cross-country pipeline, but the company remains on high alert for "potential terror acts" in the coming days. The assault on Saudi oil infrastructure came amid U.S. military build-up in the region and worsening relationship with Iran. Saudi Arabia launched a retaliatory attack on Wednesday against Iran-backed Houthi rebels in the neighboring Yemen, while addressing a letter to the United Nations Security Council blaming Iran for an "act of terrorism" against its oil pipeline. The United States reportedly pulled out non-emergency personnel from its embassy in Iraq, citing threats from Iranian-backed forces.

Meanwhile, Flotta crude production in the North Sea was shut-in on Thursday after hydraulic fluid was found in the main pipeline to the export terminal in Scotland. According to Reuters report, Flotta output totaled 59,000 barrels per day (bpd) last year and will remain shut-in until repairs on the pipeline are completed, adding to further tightness in European crude market.

The market also faces uncertainty over whether Organization of Petroleum Exporting Countries and other producers will continue with supply cuts that have boosted prices more than 30% so far this year. OPEC revised global demand for its oil up to 30.58 million bpd in 2019, according to its latest Monthly Oil Market Report released earlier this week. OPEC's crude output remained mostly unchanged in April at 30.031 million bpd, a near-four-year low. Markets will be closely watching the OPEC/non-OPEC monitoring committee meeting scheduled this weekend in Jeddah, Saudi Arabia. Islamic Republic of Iran declined to send a representative, according to official statement from OPEC.

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