Oil Prices Decline As Ceasefire Talks In Mideast Ease Supply Fears
Oil prices fell on Friday as the likelihood a ceasefire in Gaza overshadowed strong summer fuel demand and potential disruptions from Gulf of Mexico hurricanes. Brent crude futures dropped 89 cents, or 1.02%, to $86.54 a barrel, after hitting their highest since April earlier in the session. US West Texas Intermediate (WTI) crude futures settled at $83.16 a barrel, down 72 cents, or 0.9%, Reuters reported.
For the week, Brent saw a 0.4% increase, while WTI futures rose by 2.1%. The head of Israel's Mossad returned from Doha following initial talks with mediators aiming for a Gaza ceasefire and hostage release deal, with negotiations set to continue next week, according to Israel Prime Minister Benjamin Netanyahu's office.
Netanyahu's office stated that there are still gaps between the negotiating parties. "Obviously a breakthrough there would help calm the waters," said John Kilduff, partner at Again Capital. A reduction in Middle Eastern conflict risks lowers the risk premium on oil from the region and impacts prices.
WTI did not settle on Thursday due to the Independence Day holiday, leading to thin trading. However, prices have increased this week due to strong summer oil demand expectations in the US.
"The last couple of days represent the peak of the drive season in terms of demand and prices continue to creep higher," noted Tim Snyder, economist at Matador Economics, in a Friday note. This rise is attributed to stronger consumer demand and Hurricane Beryl's effects.
The US Energy Information Administration (EIA) reported a significant drawdown of 12.2 million barrels in inventories last week, far exceeding analyst expectations of a 700,000-barrel draw.
Hurricane Beryl, a Category 2 storm, made landfall in Mexico after causing at least 11 deaths in the Caribbean and damaging buildings and power lines across several islands. While Mexico's major oil platforms are not expected to be affected by the storm, US oil projects could face disruptions if Beryl continues its projected path.
The possibility of upcoming U.S. interest rate cuts has also raised expectations for increased oil demand. U.S. job growth slowed slightly in June, but an increase in unemployment to over a two-and-a-half-year high of 4.1% and moderated wage gains suggest easing labor market conditions.
This could lead to a rate cut at the July meeting. "This morning's employment data shows that there are some cracks in the labor market that could spur on a rate cut even this month," said Kilduff at Again Capital.
Lower interest rates can stimulate economic activity and boost crude oil demand.
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