June 23, 2024
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Oil Prices Face Weekly Decline Amid Gaza Ceasefire Uncertainty

Crude oil prices were poised for a weekly decline as reports of ongoing negotiations for a ceasefire between Israel and Hamas emerged, despite experiencing gains earlier in the week.

Unnamed sources cited by Bloomberg and statements from the Qatari foreign ministry, as reported by Israel’s Jerusalem Post, indicated initial approval from Hamas for a ceasefire and a hostage deal.

However, OilPrice.com reports that a Palestinian official suggested that final approval might be contingent on Israel committing to end the war in Gaza and fully withdrawing from the enclave.

Simultaneously, France24 reported the Israeli army’s advance on Rafah in the south, indicating that an actual ceasefire might take some time.

The announcement of a potential deal led to a softening of oil prices, following earlier solid gains triggered by the Red Sea crisis.

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Additional support for oil benchmarks came from OPEC+, which decided to maintain its production policy, restricting combined output by 2.2 million barrels per day.

Despite this, reports of progress in Israel-Hamas ceasefire talks prompted a reduction in geopolitical risk premiums on crude oil.

Priyanka Sachdeva from Philip Nova noted, “The recent reports on the progress toward an extended Israel-Hamas ceasefire…are keeping oil investors on the sidelines.” Vishnu Varathan from Mizuho Bank commented on the fading geopolitical risk premium on crude, stating, “But a conflict this entrenched and polarized is unlikely to have a linear, unfettered and short path to resolution.”

Meanwhile, the Yemeni Houthis continued their targeting of ships in the Red Sea, with the group announcing the latest attack on an unidentified British merchant ship on Thursday.

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