Oil prices turn higher as Middle East ceasefire hopes wane

By Thomson Reuters Apr 8, 2024 | 7:56 PM

By Colleen Howe

BEIJING (Reuters) – Oil prices rose in early Asian trading after hopes diminished that negotiations between Israel and Hamas would lead to a ceasefire in Gaza and ease tension in the Middle East.

Brent crude futures rose 40 cents to $90.78 a barrel by 0032 GMT. U.S. West Texas Intermediate (WTI) crude rose 35 cents to $86.78.

A fresh round of Israel-Hamas ceasefire discussions in Cairo had ended a multi-session rally on Monday, leading Brent to its first decline in five sessions and WTI its first in seven on the prospect that geopolitical risks could ease.

But then Israeli Prime Minister Benjamin Netanyahu said on Monday an unspecified date had been set for Israel’s invasion of the Rafah enclave in Gaza, “ending the hopes that briefly gripped the market yesterday that geopolitical tensions in the region might be easing,” Tony Sycamore, a market analyst with IG, wrote in a note.

Hamas rejected the latest Israeli ceasefire proposal made at the talks in Cairo, a senior Hamas official also said on Monday.

The market is continuing to weigh the risk of a disruption to oil supply. An Iranian response to Israel’s suspected attack on its consulate in Syria “could drag the oil market into the conflict, after being largely unimpacted since Hamas’s attack on Israel,” ANZ analysts said in a client note.

Tehran said last week that it would take revenge after an airstrike that killed two of its generals and five military advisors in Damascus, although Israel has not claimed responsibility for the attack.

Meanwhile, broader fundamentals are supportive of prices, the ANZ analysts said. India’s fuel demand hit a record high in the 2024 fiscal year driven by higher gasoline and jet fuel consumption, data showed on Monday. An improvement in Chinese manufacturing activity announced last week is expected to boost fuel demand.

This week, the market will be watching inflation data due from the U.S. and China this week for further signals on the economic direction of the world’s top two oil consumers.

In the Americas, Mexico’s state oil company Pemex said it would reduce crude exports by 330,000 barrels per day so it can supply more to domestic refineries, cutting the supply available to the company’s U.S., Europe, and Asian buyers by one-third.

(Reporting by Colleen Howe; Editing by Sonali Paul)