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Saudi Arabia hikes June crude oil prices for most regions

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US oil rig count falls by 7 to 499, Baker Hughes ( BKR ) reports

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China's April business sentiment rises, Caixin PMI shows

(Adds comments, updates prices)

By Florence Tan

SINGAPORE, May 6 (Reuters) - Oil futures climbed on

Monday after Saudi Arabia hiked June crude prices for most

regions and as the prospect of a Gaza ceasefire deal appeared

slim, renewing fears the Israel-Hamas conflict could still widen

in the key oil producing region.

Brent crude futures gained 34 cents, or 0.4%, to

$83.30 a barrel at 0518 GMT, while U.S. West Texas Intermediate

crude futures were at $78.45 a barrel, up 34 cents, or

0.4%.

Saudi Arabia raised the official selling prices (OSPs) for

its crude sold to Asia, Northwest Europe and the Mediterranean

in June, signalling expectations of strong demand this summer.

"After falling a little more than 7.3% last week due to

easing geopolitical tensions, ICE Brent has started the new

trading week on a stronger footing, opening higher," ING's head

of commodities research Warren Patterson said in a note.

This comes after Saudi Arabia raised June OSPs for most

regions amid a tightening of supplies this quarter, he added.

In China, the world's largest crude importer, services

activity remained in expansionary territory for the 16th

straight month, while growth in new orders accelerated and

business sentiment rose solidly, boosting hopes of a sustained

economic recovery.

Last week, both futures contracts posted their steepest

weekly loss in three months with Brent falling more than 7% and

WTI down 6.8%, as investors weighed weak U.S. jobs data and the

possible timing of a Federal Reserve interest rate cut.

The geopolitical risk premium in oil prices has also eased

as talks for a Gaza ceasefire are underway.

However, prospects for a deal appeared slim on Sunday as

Hamas reiterated its demand for an end to the war in exchange

for the freeing of hostages, and Israeli Prime Minister Benjamin

Netanyahu flatly ruled that out.

"News that Israel wants to go ahead and extend its operation

into Rafah, risks derailing a potential ceasefire agreement and

reigniting Middle Eastern geopolitical tensions which had

appeared to be easing," IG markets analyst Tony Sycamore said.

With most of the long positions in oil cleared last

week, the risks appear to be for WTI prices to rebound back

towards $80 in the early part of this week, he added.

In a sign supply may tighten, U.S. energy companies cut the

number of oil and natural gas rigs operating for a second week

in a row last week. Oil rigs fell by seven to 499, in the

biggest weekly drop since November 2023, Baker Hughes ( BKR )

said in a report on Friday.