The recent ceasefire agreement between Israel and Hamas has led to a decline in oil prices, reflecting reduced geopolitical tensions in the Middle East. This development comes amid an environment of fluctuating commodity values driven by the strength of the U.S. dollar.
Oil Prices and the Ceasefire Agreement
On October 9, oil prices experienced a notable decrease. Brent crude futures dropped by 34 cents, or 0.51%, to settle at $65.91 per barrel. U.S. West Texas Intermediate (WTI) crude fell 38 cents, or 0.61%, reaching $62.17.
Market Reactions
Kelvin Wong, a senior market analyst at OANDA, noted the impact of the ceasefire on market sentiment. He stated that WTI’s performance reflects a weakening geopolitical risk premium associated with the peace agreement.
U.S. President Donald Trump announced the breakthrough in negotiations that included a hostages’ return as part of the ceasefire plan aimed at ending the ongoing conflict in Gaza. Following this, Israeli Prime Minister Benjamin Netanyahu indicated plans to convene the government for approval of the ceasefire.
Potential Impacts on Oil Supply
Even with the ceasefire, industry experts express skepticism regarding substantial changes in Middle Eastern oil supply. Michael McCarthy, CEO of Moomoo Australia and New Zealand, pointed out that OPEC+ has not achieved its production targets. The organization announced a mild output increase for November, falling short of market expectations, which helped mitigate oversupply concerns.
U.S. Petroleum Consumption Trends
In a related report from the Energy Information Administration, weekly U.S. petroleum products supplied reached 21.990 million barrels per day. This figure marks the highest level since December 2022.
- Weekly U.S. oil supply: 21.990 million barrels/day
- Brent crude price: $65.91/barrel
- WTI crude price: $62.17/barrel
- OPEC+ output increase for November: Smaller than expected
JP Morgan analysts reported a slower start to global oil demand in October, attributing this to various consumption indicators. Despite an increase in average global demand to 105.9 million barrels per day, it reflects a 90,000 bpd shortfall compared to previous estimates.
Finally, it is worth noting that the pace of global crude and products inventory build has decelerated, with a notable increase of only 8 million barrels reported last week—the slowest growth within five weeks.
This evolving landscape suggests that while geopolitical factors can influence oil prices, structural supply and demand variables also play a critical role in shaping market behavior.
