Saturday , June 22 2024

Oil steadies as ceasefire eludes Hamas & Israel


HOUSTON/ LONDON/ CAIRO: Oil futures ended largely unchanged on Monday as a ceasefire agreement between Hamas and Israel continued to elude negotiators.

Both crude oil benchmarks settled 37 cents, or 0.5%, higher with Brent crude futures at $83.33 a barrel and US West Texas Intermediate crude futures (WTI) at $78.48 a barrel.

Last week, both contracts posted their steepest weekly loss in three months, with Brent falling more than 7% and WTI down 6.8%, as investors weighed weak US jobs data and the possible timing of a Federal Reserve interest rate cut.

Throughout trading on Monday, global benchmark Brent climbed and then retreated on prospects for a ceasefire, reaching a high of $83.83 and a low of $82.77.

“(A possible agreement) took some air out of the oil market,” said Andrew Lipow, president of Lipow Oil Associates. “Any ceasefire agreement would lessen the tension in the Middle East.

An Israeli official said the ceasefire proposal from Egypt that Hamas accepted had some far-reaching aspects that were unacceptable.

Hamas has demanded for an end to the war in exchange for the freeing of hostages and Israel appeared poised to launch a long-threatened assault in the southern Gaza Strip.

“Markets are a little jaded about geopolitical risk from the war,” said John Kilduff, partner with Again Capital. “I think you’re going to have to see more kinetic activity to move the markets.”

Also supporting oil was Saudi Arabia’s move to raise the official selling prices for its crude sold to Asia, Northwest Europe and the Mediterranean in June, signaling expectations of strong demand this summer.

Lipow said he expects the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will announce at meetings in June plans to continue production cuts in the third quarter.

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.

Oil steadied on Tuesday as weakness in the physical market countered concern about conflict in the Middle East as Israel stepped up attacks in southern Gaza and a ceasefire deal between Hamas and Israel hung in the balance.

The Israeli military seized control of the Rafah border crossing between the Gaza Strip and Egypt and its tanks pushed into the southern Gazan town of Rafah, as mediators struggled to secure a ceasefire agreement.

Brent crude futures were down 7 cents to $83.26 a barrel at 0950 GMT, while US West Texas Intermediate (WTI) crude futures were unchanged at $78.48.

“Truce remains elusive, and even if it is reached the question remains whether Houthi hostilities in the Red Sea would cease and the Suez Canal would reopen, significantly mitigating the risk of shipping throughout the region,” said Tamas Varga of oil broker PVM. “I believe the lack of optimism of the past few days is more the result of genuine weakness in the physical markets,” he added.

In a sign of easing concern that supply could tighten, the premium of the first-month Brent contract to the six-month contract slipped to $2.95 a barrel on Monday, the lowest since mid-February, and was near that level on Tuesday.

On Monday crude settled higher, partly reversing last week’s drop. Brent and WTI had registered their steepest weekly losses in three months as the market focused on weak US jobs data and the possible timing of a Federal Reserve interest rate cut. (Int’l Monitoring Desk)

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