Oil Prices Slip as Gaza Ceasefire Nears
In a twist of events, oil prices took a dip on Friday as the possibility of a Gaza ceasefire loomed large, easing geopolitical tensions in the Middle East. Along with this, a stronger dollar and weakening US gasoline demand added pressure on prices, as reported by Reuters.
Market Movement
Brent crude futures saw a decline of 42 cents, or 0.5 percent, settling at $85.36 a barrel by 5:03 a.m. Saudi time. US crude futures also dropped by 40 cents, or 0.5 percent, to $80.67 per barrel. Despite these fluctuations, both contracts are expected to close the week with minimal changes after experiencing a more than 3 percent increase last week.
Factors at Play
The downward trend in oil prices was attributed to reports of a UN draft resolution proposing a ceasefire in Gaza. Additionally, profit-taking activities contributed to the market movement, as noted by IG analyst Tony Sycamore.
Geopolitical Developments
US Secretary of State Antony Blinken expressed optimism about potential talks in Qatar leading to a ceasefire agreement between Israel and Hamas. This development could potentially reduce geopolitical risks in the region. Blinken’s discussions with Arab foreign ministers and Egypt’s President Abdel Fattah El-Sisi in Cairo, alongside ongoing negotiations in Qatar, focused on a proposed truce lasting about six weeks.
Impact on Demand
In the US, a key player in the oil market, gasoline product supplied dipped below 9 million barrels for the first time in three weeks, indicating a potential slowdown in crude demand. However, consultancy FGE highlighted preliminary data for the first half of March, showing a significant decrease in on-land crude and main product stocks at major oil hubs globally. This could potentially have a bullish impact on oil prices.
Market Dynamics
On the currency front, the US dollar, which has an inverse relationship with oil prices, strengthened following a surprise interest rate cut by the Swiss National Bank. This move boosted global risk sentiment but made oil more expensive for investors using other currencies, thereby impacting demand.