Oil Market Dips as Ceasefire Talks Advance, Supply Worries Heighten

By Adedapo Adesanya

The oil market was down for a second day on Tuesday, as talks for a ceasefire in Gaza continued even as supply worries heightened in other places.

Brent crude futures lost 96 cents or 1.1 per cent to trade at $89.42 per barrel, while the US West Texas Intermediate (WTI) crude futures depreciated by $1.20 or 1.4 per cent to quote at $85.23 per barrel.

Egyptian and Qatari mediators met resistance in their search to find a way out of the war as the talks in Cairo have so far failed to reach a breakthrough.

On Monday, Brent posted its first decline in five sessions and WTI its first in seven as a fresh round of Israel-Hamas ceasefire discussions in Cairo raised hopes of a breakthrough.

Hamas said Israel proposal on a ceasefire met none of the demands of Palestinian militant factions, but that it would study the offer further and deliver its response to mediators.

This further had an effect on prices as affected as analysts said that a progress could reduce risks of other parties entering into the war.

Market analysts also noted that without an end to the conflict, there is an elevated risk that other countries, particularly Iran, which is the third-largest producer in the Organisation of the Petroleum Exporting Countries (OPEC), could be drawn into the war.

The commander of the Revolutionary Guard’s navy in Iran said it could close the Strait of Hormuz if deemed necessary.

This would affect oil supply as about 20 per cent of the volume of the world’s total oil consumption passes through the strait daily.

Meanwhile, Turkey announced it would restrict exports of various products, including jet fuel, to Israel until there is a ceasefire. Israel said it would respond with its own curbs.

Adding to concerns of a tight market, Mexico’s state oil company, Pemex, said it would reduce crude exports by 330,000 barrels per day in May so it can supply more to domestic refineries.

This means the non-OPEC producer is cutting by a third the supply available to its U.S., European and Asian buyers. Pemex had already cut its April exports by 436,000 barrels per day.

US crude oil inventories climbed last week by 3.034 million barrels, according to market sources citing American Petroleum Institute (API) figures.

Official US government inventory data from the Energy Information Administration (EIA) is due on Wednesday morning.