On Tuesday, oil prices increased as hopes dimmed for a cease-fire in Gaza and a reduction in Middle East tensions resulting from talks between Israel and Hamas.
By 0330 GMT, Brent crude futures had increased by 28 cents to $90.66 per barrel. West Texas Intermediate (WTI) crude for the United States was up 21 cents at $86.64.
On Monday, a multi-session rally came to an end with a new round of Israel-Hamas ceasefire talks in Cairo. As a result, the possibility arose that geopolitical risks could diminish. Consequently, Brent decreased for the first time in five sessions, and WTI declined for the first time in seven.
However, Israeli Prime Minister Benjamin Netanyahu announced on Monday that Israel would invade the Rafah enclave in Gaza at an undisclosed date, “ending the hopes that briefly gripped the market yesterday that geopolitical tensions in the region might be easing,” according to a note from Tony Sycamore, an IG market analyst.
Early on Tuesday, Hamas declared that none of the requests made by Palestinian factions were met by Israel’s plan, which it received from mediators in Qatar and Egypt. However, Hamas declared that it will review the plan before getting back to the mediators.
The potential of an interruption in the supply of oil is still being considered by the market. “Could drag the oil market into the conflict, after being largely unimpacted since Hamas’s attack on Israel,” ANZ analysts wrote in a client note in response to Iran’s alleged strike on Israel’s embassy in Syria.
Although Israel has not claimed responsibility for the incident, Tehran declared last week that it will exact revenge. Following an airstrike that killed two of its generals and five military advisors in Damascus.
“The positive geopolitical risk premium is indeed supporting the current medium-term uptrend phase of oil,” said Kelvin Wong, a senior market analyst at OANDA in Singapore.
In the meanwhile, the ANZ analysts stated that prices remain supported by broader fundamentals. According to figures released on Monday, India’s fuel demand reached a record high in the fiscal year 2024 due to increased use of gasoline and jet fuel. Fuel demand is predicted to increase following the announcement last week of an uptick in Chinese manufacturing activity.
Additionally, the market will study this week’s inflation statistics from China and the United States. These will provide additional clues about the economic trajectory of the two largest oil consumers in the world.
Pemex, the state oil firm of Mexico, announced that it would lower its crude exports by 330,000 barrels per day in the Americas to increase its supply to local refineries. This would result in a one-third reduction in the amount of crude available to Pemex’s buyers in the United States, Europe, and Asia.
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