By Adedapo Adesanya
Oil depreciated on Friday as the possibility of a ceasefire deal in Gaza outweighed strong seasonal fuel demand and potential supply disruptions from Gulf of Mexico hurricanes.
Brent crude futures lost 89 cents or 1.02 per cent to close at $86.54 a barrel and the US West Texas Intermediate (WTI) crude futures fell by 72 cents or 0.9 per cent to trade at $83.16 a barrel.
For the week, Brent rose by 0.4 per cent while WTI posted a 2.1 per cent rise.
On the geopolitical scene, according to a statement released by the office of Israel’s Prime Minister, Mr Benjamin Netanyahu, on Friday, the director of Israel’s Mossad has returned from Doha in Qatar after receiving a first meeting with mediators who are attempting to achieve a ceasefire and hostage release agreement in Gaza.
The discussions will continue the following week but in the statement, the office of Netanyahu said there are still differences between the two parties.
Market analysts noted that a breakthrough would help calm the waves in such a case.
If the war in the Middle East is resolved, the risk premium of barrels exported from the area decreases, which in turn hurts oil prices.
Prices rose over the week on strong summer oil demand expectations in the US while Hurricane Beryl also gave support.
On the supply side, Hurricane Beryl, a Category 2 storm, made landfall in Mexico, after killing at least 11 people in the Caribbean. Although Mexico’s major oil platforms are not expected to be affected by the storm, oil projects in US waters to the North may be disrupted if the hurricane continues on its expected path.
Oil market analysts have been forecasting a tighter market in the third quarter as summer fuel demand picks up. One such is from UBS, which expects that global oil demand will grow by 1.5 million barrels per day this year, above the long-term growth rate of 1.2 million barrels per day.
The bank forecasts bigger inventory declines in the coming weeks as the Organisation of the Petroleum Exporting Countries and its allies, OPEC+ keep production cuts in place through September.
JPMorgan has also forecast that Brent will hit $90 per barrel in August or September.
Already, US inventory data appears to confirm those forecasts, with crude stocks declining by 12.2 million barrels and gasoline (petrol) falling by 2.2 million barrels last week.
Meanwhile, the prospect that US interest rate reductions are imminent increased hopes for a rise in oil consumption.
Modupe Gbadeyanka