Oil prices fell on Thursday after Israel and Hamas reached the first phase of a ceasefire and hostage deal, cooling geopolitical tensions in the Middle East and reducing the risk premium that had supported crude markets during the Gaza war.
A stronger U.S. dollar also weighed on commodities.
Brent crude futures slipped 34 cents, or 0.51%, to $65.91 a barrel by 0413 GMT, while U.S. West Texas Intermediate (WTI) crude dropped 38 cents, or 0.61%, to $62.17.
“WTI crude is trading on the weaker side of the pendulum today due to a reduction in geopolitical risk premium triggered by the Israel-Hamas peace deal,” said Kelvin Wong, senior market analyst at OANDA.
U.S. President Donald Trump announced on Wednesday that Israel and Hamas had agreed to a long-awaited plan to end the two-year-old war in Gaza, beginning with a ceasefire and the release of hostages.
Israeli Prime Minister Benjamin Netanyahu said he would convene his government on Thursday to approve the deal.
Oil markets had been supported for months by fears that the Gaza conflict could escalate into a wider regional war, threatening energy supplies from key Middle Eastern producers. The ceasefire news eased those concerns, leading investors to trim risk exposure.
However, analysts said the ceasefire is unlikely to immediately alter oil production or supply conditions. “The Gaza ceasefire will not change oil supply in the Middle East as OPEC+ has not yet met its higher production targets,” said Michael McCarthy, CEO of investor platform Moomoo Australia and New Zealand.
OPEC+ — the Organization of the Petroleum Exporting Countries and its allies — agreed on Sunday to a smaller-than-expected production increase for November, easing oversupply concerns but keeping output constraints in place.
Meanwhile, the U.S. dollar’s strength against major currencies such as the yen and euro further pressured oil prices, making dollar-denominated crude more expensive for non-U.S. investors.
Prices had risen about 1% on Wednesday, hitting a one-week high, as stalled negotiations on a Ukraine peace deal signaled ongoing sanctions against Russia, a major oil exporter.
Data from the U.S. Energy Information Administration showed that total weekly petroleum products supplied, a proxy for U.S. fuel demand, climbed to 21.99 million barrels per day last week, the highest since December 2022.
JP Morgan analysts noted that global oil demand started October on a weaker footing, with indicators such as container arrivals at the Port of Los Angeles, truck toll mileage in Germany, and shipping activity in China showing slower momentum.
Global demand averaged 105.9 million barrels per day in the first week of October, about 90,000 barrels below JP Morgan’s forecast but still 300,000 barrels higher than a year ago.
The pace of global crude and refined product inventory builds also slowed, rising by just 8 million barrels last week, the smallest increase in five weeks, suggesting the market remains broadly balanced despite easing geopolitical risk.
Source: Reuters
Written By Rodney Mbua
