Oil Prices Diverge as Attempt to Calm Middle East Tensions Stall
Oil prices diverged, moved in different directions, in the global commodities market amidst stalling ceasefire talks between Israel and Hamas while data showed that US crude inventories fell significantly.
The commodities market dynamics have created imbalance between the supply and demand sides, making analysts prediction about energy costs direction herculean task.
The fight in the Middle East have negative effects on the crude oil supply but weak demand expectations in China also remain downside to the buy side.
In the market, Oil prices were mixed in a volatile trading session on Wednesday with data indicating an increase in US crude oil inventories. This come at the heel of growing uncertainties over US Federal Reserve (Fed) rate.
ICE Brent crude rose 0.1% to $77.26 per barrel after previous fall. US benchmark West Texas Intermediate (WTI) fell 0.04% to $73.14 per barrel, after closing at $73.17 in the prior session.
According to estimates, there is a higher likelihood that the Fed will implement a 25 basis point rate cut in September. However, uncertainty persists regarding the monetary policy actions that may be taken through the end of the year.
Moreover, ongoing geopolitical conflicts in the Middle East continue to influence upward price movements by fueling market players’ supply fears.
A news report stated that three Palestinians were injured on Tuesday in separate incidents involving Israeli army gunfire and attacks by illegal settlers across the occupied West Bank.
For months, the US, Qatar and Egypt have been trying to reach an agreement between Israel and Hamas to ensure a hostage swap deal and a cease-fire and allow humanitarian aid to enter Gaza.
However, mediation efforts have stalled due to Prime Minister Benjamin Netanyahu’s refusal to meet Hamas’ demands to end the war.
An informed Israeli source told public broadcaster KAN that Netanyahu continues to put obstacles before prisoner swap deal with Hamas.
Yesterday, oil closed lower for a fourth consecutive day. ICE Brent settled almost 1.5% lower yesterday, leaving it to close just above US$76/bbl – the weakest settlement since January, according to ING commodities strategists Warren Patterson and Ewa Manthey.
Analysts said this weakness comes despite cease-fire talks between Israel and Hamas appearing to have stalled, while the EIA also published a fairly constructive weekly US inventory report.
Still, demand worries from top crude oil consumers continue to be the main driver for the market at the moment, analysts said in a separate notes.
According to ING, the downward pressure on prices makes it increasingly likely that OPEC+ will have to scrap their plans for gradually increasing supply from October.
Failing to do so, will likely put further pressure on prices, ING Patterson and Manthey said in their note on Wednesday.
The EIA’s weekly report was fairly bullish. US commercial crude oil inventories fell by 4.65 million barrels over the last week, more than the 2.2 million barrel decline the market was expecting.
This leaves crude inventories at 426 million barrels, the lowest since January, analysts said. The larger-than-expected draw was driven by stronger crude export volumes, which increased 289,000 b/d week on week and also by an increase in refinery run rates, with crude inputs growing 222,000 b/d over the week.
US refined products also saw inventory declines. Gasoline and distillate stocks fell by 1.61 million barrels and 3.31 million barrels respectively.
For gasoline, the draw would have been helped by stronger implied demand, which grew 148,000 b/d, while for distillates, a 313,000 b/d increase in export volumes contributed to the larger stock decline. In fact, distillate exports hit a record level of 1.85m b/d over the week. #Oil Prices Diverge as Attempt to Calm Middle East Tensions Stall
