WTI, Brent fall as rally takes a breather

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

U.S. crude oil and global benchmark Brent are ahead 5.5% and 4.9%, respectively, for the month as prices have bounced back from May doldrums on a more optimistic outlook for summer fuel demand.

Here are today’s energy prices:

• West Texas Intermediate August contract: $81.27 per barrel, down 38 cents, or 0.47%. Year to date, U.S. oil has gained 13.4%
• Brent August contract: $85.66 per barrel, down 35 cents, or 0.41%. Year to date, the global benchmark is ahead 11.2%.
• RBOB Gasoline July contract: $2.50 per gallon, down 0.10%. Year to date, gasoline is up 19.3%.
• Natural Gas July contract: $2.80 per thousand cubic feet. Year to date, gas is up 11.5%.

Geopolitical tensions are also back in focus amid fears that Israel and the Iran-backed militia Hezbollah could go to war. Air Force General CQ 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.

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.

Ryan McKay, TD Securities senior commodity strategist, also warned that “supply risks are back in focus for crude oil with tensions building in the Middle East between Israel and Lebanon, while further ship attacks in the Red Sea reignite concerns.”

But McKay also said the oil rally could fade with funds likely to start liquidating long positions if WTI prices fall below $81 per barrel.