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Oil Cements Weekly Gain as Israel Presses Military Offensive

(Bloomberg) — Oil posted a weekly gain as prospects for a cease-fire in the Israel-Hamas war faded and Israel prepared to attack southern Gaza, increasing crude’s geopolitical risk premium.

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West Texas Intermediate settled near $76 a barrel, cementing a 6.3% weekly advance. Prime Minister Benjamin Netanyahu dismissed a potential cease-fire and previewed a military push into southern Gaza, where more than 1 million people have sought refuge. The military escalations injected fresh risks for crude flows in a region that accounts for about a third of the world’s oil output.

“Oil prices remain quite sensitive to the developments in the Middle East, and it appears as though nothing else matters too much,” keeping futures “volatile”, wrote Fawad Razaqzada, a market analyst at City Index and Forex.com, in a note to clients.

Technical measures have also signaled strength in the market. In the US, the premium of gasoline over crude increased to the highest since September after nationwide inventories declined. Traders continue to watch Ukrainian drone attacks on Russian refineries, while a fire broke out at another Russian site on Friday. The attacks bolstered diesel futures to the highest since November and gasoil futures to the highest since October.

Heightened tensions in the major oil-producing region come as Netanyahu said he sees “no other solution than total victory,” and Iraq threatens to pull support for the American-led coalition. Meanwhile, Houthi attacks on merchant ships have escalated throughout the week, causing major shipping companies to warn that security situation in the Red Sea continues to deteriorate.

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Meanwhile in Europe, there’s been buying in a key North Sea pricing period, indicating a stronger crude market in the region. That helped push Brent’s prompt spread — a gauge of near-term market health — to its biggest daily gain since October.

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