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Oil prices turn higher as Middle East ceasefire hopes wane
Global Banking and Finance Review
Company
By Colleen Howe and Andrew Hayley
BEIJING (Reuters) -Oil prices rose on Tuesday after hopes diminished that negotiations between Israel and Hamas would lead to a ceasefire in Gaza amid concerns the lingering conflict could potentially disrupt supply from the key Middle East producing region.
Brent crude futures rose 14 cents to $90.52 a barrel by 0610 GMT. U.S. West Texas Intermediate (WTI) crude was 10 cents higher at $86.53.
A fresh round of Israel-Hamas ceasefire discussions in Cairo had ended a multi-session rally on Monday, leading Brent to its first decline in five sessions and WTI to its first in seven on the prospect that geopolitical risks could ease.
But Israeli Prime Minister Benjamin Netanyahu said on Monday an unspecified date had been set for Israel’s invasion of the Rafah enclave in Gaza.
That is “ending the hopes that briefly gripped the market yesterday that geopolitical tensions in the region might be easing,” Tony Sycamore, a market analyst with IG, wrote in a note.
Hamas said early on Tuesday that Israel’s proposal it received from Qatari and Egyptian mediators did not meet any of the demands of Palestinian factions. But Hamas said it would study the proposal before responding to the mediators.
Without an end to the conflict, there is an elevated risk that it involves other countries in the region, especially Iran, a major Hamas backer and the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).
An Iranian response to Israel’s suspected attack last week on its consulate in Syria “could drag the oil market into the conflict, after being largely unimpacted since Hamas’s attack on Israel,” ANZ analysts said in a client note.
Tehran said that it would take revenge after an airstrike killed two of its generals and five military advisors in Damascus, although Israel has not claimed responsibility for the attack.
“The positive geopolitical risk premium is indeed supporting the current medium-term uptrend phase of oil,” said Kelvin Wong, a senior market analyst at OANDA in Singapore.
Broader fundamentals are supportive of prices as well, the ANZ analysts said. India’s fuel demand hit a record high in the 2024 fiscal year driven by higher gasoline and jet fuel consumption, data showed on Monday. An improvement in Chinese manufacturing activity announced last week is also expected to boost fuel demand.
This week, the market will be watching inflation data due from the U.S. and China for further signals on the economic direction of the world’s top two oil consumers.
In the Americas, Mexico’s state oil company Pemex said it would reduce crude exports by 330,000 barrels per day so it can supply more to domestic refineries, cutting the supply available to the company’s U.S., European and Asian buyers by one-third.
(Reporting by Colleen Howe and Andrew Hayley; Editing by Sonali Paul, Jamie Freed and Christian Schmollinger)
Brent crude oil is a major trading classification of crude oil originating from the North Sea. It serves as a benchmark for pricing oil globally and is used to set the price for two-thirds of the world's internationally traded crude oil supplies.
West Texas Intermediate (WTI) is a grade of crude oil used as a benchmark in oil pricing. It is sourced from North America and is known for its light and sweet characteristics, making it desirable for refining into gasoline.
The Organization of the Petroleum Exporting Countries (OPEC) is a group of oil-producing countries that coordinates and unifies petroleum policies among member countries to ensure the stabilization of oil markets.
Inflation data measures the rate at which the general level of prices for goods and services is rising, indicating the purchasing power of a currency. It is a key economic indicator used by policymakers and investors.
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