Ceasefire hopes in Gaza pushes Brent lower

The front-month ICE Brent contract moved $2.16/bbl lower on the day, to trade at $77.18/bbl at 09.00 GMT.

PHOTO: Black oil barrels. Getty Images

Upward pressure:

Demand growth expectations in the US have provided some support to Brent’s price today. Crude stocks in the world’s largest oil-consuming nation are expected to have decline by 2.9 million bbls last week, according to a Reuters poll.

Weekly report on US crude inventories will be released tomorrow by the American Petroleum Institute (API), followed by another report by the US Energy Information Administration (EIA) on Wednesday.

“Domestic [crude oil] demand has been strong in the US,” ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

On the supply side, fire at an oil depot in Russia’s southern Rostov region continued yesterday, after Ukraine launched repeated drone attacks on Sunday, Russian officials confirmed in a statement.

One of the unidentified aerial vehicles (UAVs) crashed into the Kavkaz oil and petroleum storage facility in Russia’s Rostov region and ignited a fire, its governor Vasily Golubev said on the Telegram messaging app.

The facility is located 150 miles from the Ukraine-Russia border.

The recent attacks on Russian energy facilities by Ukrainian drones have disrupted the country’s oil refining capacity and added upward pressure on the price of Brent crude.

Downward pressure:

Crude oil came under pressure today after Israel accepted the latest draft of the ceasefire agreement proposed by the US. This news comes following US secretary of state Antony Blinken’s visit to Israel this week.

Blinken said on Monday that Israeli Prime Minister Benjamin Netanyahu has accepted a preliminary proposal to mediate a ceasefire deal in the Gaza Strip and urged leaders from the Iran-aligned Hamas armed group to do the same.

“A de-escalation of tensions in the Middle East would likely see the geopolitical risk premium evaporate quickly,” Hynes said. This could put further downward pressure on Brent futures.

In China, the world’s second-largest oil consumer, worries about a slowdown in economic growth have subsequently put a lid on oil consumption growth and pushed Brent’s price lower. China's latest trade and industrial output numbers suggested that “apparent oil demand continued to trend lower in July,” two analysts from ING Bank said.

“Oil prices continued to decline... due to ongoing demand concerns [in China] and potential progress in mediating the Israel-Hamas conflict,” analysts from Saxo Bank noted.

Besides, the global oil market will keep an eye on developments in the US Federal Reserve’s (Fed) three-day annual Jackson Hole Economic Symposium starting tomorrow. The event will gather central bank leaders in Wyoming, US.

Fed’s chairman Jerome Powell will speak about the US Fed's preferred path for interest rate cuts this year. Oil market analysts expect a rate cut in September, when the Fed members will convene.

Higher interest rates make dollar-denominated commodities like oil costlier for holders of other currencies.

By Aparupa Mazumder

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