LONDON, May 18 — Oil prices extended gains on Monday, driven by increasingly bleak prospects for peace in the Middle East after an attack on a nuclear power plant in the United Arab Emirates (UAE).
Brent crude futures were up ¢86, or 0.79 per cent, at US$110.12 a barrel by 1002 GMT after touching US$112 for their highest since May 5.
U.S. West Texas Intermediate crude was up ¢89, or 0.84 per cent, at US$106.31 after touching its highest since April 30 at US$108.70. The front-month June contract expires on Tuesday.
Both contracts gained more than seven per cent last week as hopes dimmed for a peace deal to end ship attacks and seizures around the Strait of Hormuz trade route.
"One billion barrels of oil have been trapped behind the strait, and Friday’s rally, which took WTI US$10 higher on the week, was also supported by belligerent United States (US) and Iranian rhetoric, as well as continued attacks on oil producers in the region and on commercial vessels," said PVM analyst Tamas Varga.
A Pakistani source told Reuters on Monday that Islamabad has shared a revised proposal from Iran with the US, aimed at ending the conflict in the Middle East, though peace efforts appear to remain stalled.
Similarly on Monday, the International Energy Agency's head Fatih Birol said that commercial oil inventories were depleting rapidly, with only a few weeks of supplies left.
Drone attacks on the UAE and Saudi Arabia, and the rhetoric from the US and Iran, raised concerns of an escalation in the conflict.
Riyadh, which intercepted three drones that entered from Iraqi airspace, warned it would take the necessary operational measures to respond to any attempt to violate its sovereignty and security.
Meanwhile, UAE officials said they were investigating the source of the strike on the Barakah Nuclear Power Plant, adding that Abu Dhabi had the right to respond to what it said were "terrorist attacks".
On Sunday, media outlet Axios reported that US President Donald Trump is expected to meet national security advisers on Tuesday to discuss options for military action, citing US officials.
On Saturday, the Trump administration allowed a sanctions waiver to lapse that had previously allowed countries, including India, to buy Russian seaborne oil after a month-long extension.
Last week's talks between Trump and Chinese President Xi Jinping ended without an indication from the world's top oil importer that it would help to resolve the conflict started by US-Israeli attacks on Iran.
