Oil prices rise 2% as Gaza ceasefire talks begin

• Oil prices, including WTI and Brent crude, rose nearly 2 percent despite a surprise increase in U.S. crude inventories.
• Positive US economic data, including strong retail sales and lower jobless claims, helped prices rebound.
• Ongoing ceasefire talks in Gaza and the complex geopolitical situation in the Middle East continue to influence oil market sentiment.

After paring gains on Wednesday following a build in U.S. crude stocks and the Biden administration’s suggestion that a Gaza ceasefire deal could stop an Iranian attack on Israel, prices are now reversing again, with WTI gaining nearly 2 % and Brent returning firmly above the $80 mark.

At 12:16 ET on Thursday, the US benchmark West Texas Intermediate (WTI) traded up 1.81% at $78.37 a barrel, while Brent crude traded up 1.86% at $81.24.

Despite data showing a surprise rise in US inventories, US economic data appeared to ease recession fears, with US retail sales rising more than expected in July and a smaller-than-expected rise in aid claims unemployment. Markets have had difficulty digesting the new economic and inventory data and balancing it with intensifying geopolitical risk. On Tuesday, the American Petroleum Institute (API) reported a draw in US crude inventories, only to be contradicted the next day by the Energy Information Administration (EIA), which reported a surprise increase, putting downward pressure on prices.

On the geopolitical front, fresh Gaza cease-fire talks began Thursday in Doha, Qatar, but without the participation of Hamas.

As the death toll in Gaza reaches 40,000 and another 90,000 injured, Israeli intelligence is meeting behind closed doors with US and Egyptian intelligence and the Qatari prime minister. This comes against the backdrop of a deployment of US warships to the region as the Biden administration hopes the talks launched today could prevent a regional war. Hamas declined to participate in the talks, but indicated it would speak to the negotiating team after the talks, Reuters reported.

In terms of fundamentals, the EIA reported on Wednesday a Increase of 1.4 billion barrels in inventories for the week ended Aug. 9, compared with a 3.7 million barrel draw from the previous week. The EIA report came a day after the API reported a 5.2 million barrel draw from inventories.

By Michael Kern for Oilprice.com

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