Oil Prices Slip as Ceasefire Talks Ease Middle East Tensions
In a twist of events, oil prices edged down on Tuesday following ceasefire talks between Israel and Hamas in Cairo. The discussions helped calm fears of an escalating conflict in the Middle East, but concerns about US interest rates lingered, dampening market sentiment, reported Reuters.
Brent crude futures declined by 0.21 percent to $88.21 a barrel at 9:30 a.m. Saudi time, while US West Texas Intermediate crude futures slipped by 0.24 percent to $82.43 a barrel.
Both benchmarks saw a loss of over 1 percent in the front-month contract on Monday.
Yeap Jun Rong, market strategist at IG, noted, “The ongoing negotiation for a potential ceasefire between Israel and Hamas has led market participants to further unwind the geopolitical risk premium in oil prices, while the upcoming Fed meeting also drives some near-term reservations.”
Meanwhile, Hamas negotiators left Cairo on Monday to consult with their leadership after talks with Qatari and Egyptian mediators regarding Israel’s truce proposal. The delegation is expected to report back within two days, according to Egyptian security sources.
Amidst the ceasefire talks, Israeli airstrikes continued to target Palestinians on Monday, with a significant number of casualties in Rafah. The attacks raised concerns about a potential invasion by Israel, urged against by foreign leaders.
On another front, attacks by Yemen’s Houthis on maritime traffic near the Suez Canal have kept oil prices stable. The recent targeting of US vessels in the Red Sea and Indian Ocean could further elevate risk premiums if crude supply disruptions are anticipated.
Investors are closely monitoring the US Federal Reserve’s policy review scheduled for May 1, as persistent inflation delays expectations for rate cuts. This could strengthen the US dollar, impacting oil demand in the process.
Additionally, concerns about demand have also weighed on sentiment, with premiums for diesel and heating oil dropping to their lowest levels in months compared to crude oil, as highlighted by ANZ analysts. Data from the Energy Information Administration shows that US consumption levels are nearing seasonal lows.