The oil settles at a minimum of one month; loses over $2 led by firm US dollar, Gaza ceasefire hopes: Brent falls 2% to $82/bbl

International crude oil prices fell more than $2 in the previous session to their lowest level since mid-June as investors weighed a possible ceasefire in Gaza in the Middle East. The strengthening US dollar further drove values ​​lower.

Brent crude oil prices fell $2.48, or 2.9%, to $82.63 a barrel. U.S. West Texas Intermediate crude futures were down $2.69, or 3.3 percent, at $80.13. In terms of domestic prices, crude oil futures last traded 3.46% lower at ₹6,609 per barrel on the Multi Commodity Exchange (MCX).

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What is weighing on the price of crude oil?

-US Secretary of State Antony Blinken said a long-sought ceasefire between Israel and the Palestinian militant group Hamas is in sight. “I think we’re on the 10-yard line and we’re heading toward the goal line to get an agreement that produces a ceasefire, brings the hostages home, and puts us on a better path to try to build peace and lasting stability,” he said. Blinken.

– The war in Gaza has prompted investors to set a risk premium when trading oil as tensions threaten global supplies. If the ceasefire is reached, Iran-backed Houthi rebels could ease their attacks on merchant ships in the Red Sea, as the group has declared the attacks in support of Hamas.

-The United Nations’ highest court has declared that Israel’s occupation of the Palestinian territories and its settlements there are illegal and should be withdrawn as soon as possible, further raising hopes for an end to the conflict.

Read also: US inflation cools for third month in a row to 0.1% in June; Wall Street raises Fed rate cut bets for September

-The U.S. dollar index rose after stronger-than-expected data on the U.S. labor market and manufacturing this week, weighing on oil prices. A stronger US currency dampens demand for dollar-denominated oil from buyers holding other currencies.

= Chinese officials acknowledged that the extensive list of economic goals outlined at the end of a Communist Party meeting contained “many complex contradictions,” pointing to a bumpy road to policy implementation.

– China’s economy grew a slower-than-expected 4.7 percent in the second quarter, raising concerns about its oil demand. Lending some support to prices, energy services firm Baker Hughes said oil rigs fell by one to 477 this week, the lowest level since December 2021.

-A global technology outage has disrupted operations in several industries, with airlines grounding flights, some broadcasters going off the air, and sectors from banking to healthcare affected by system problems. Meanwhile, two large oil tankers caught fire after colliding near Singapore.

-Singapore is the largest oil trading center in Asia and the largest bunkering port in the world. The surrounding waters are vital waterways for trade between Asia, Europe and the Middle East and are among the busiest sea lanes in the world.

Read also: Israel’s covert forces are emerging as the newest player in the Gaza conflict

Where are prices headed?

According to Kaynat Chainwala, AVP-Commodity Research, Kotak Securities, WTI crude oil prices rose to $82.80 a barrel, supported by a third consecutive week of declines in inventories and increased optimism about an earlier Fed pivot. Over the past three weeks, U.S. crude oil inventories have fallen by more than 20 million barrels, according to the EIA Weekly Petroleum Status Report.

In addition, Bloomberg reported that OPEC+ delegates anticipate that the group’s next monitoring session next month will be routine, with no changes expected in plans to increase supply starting in the fourth quarter. Uncertainty surrounding initiatives aimed at addressing structural problems in China’s economy during the recent key policy meeting could weigh further on demand, after an 11% drop in oil imports in June.

“Oil prices are supported by anticipation of possible Fed rate cuts at the September policy meetings. However, gains in crude were capped by a rebound in the dollar index and the IMF board’s recommendation that the US keep interest rates higher until the end of this year. We expect crude oil prices to remain volatile. Crude oil has support at $79.80-79.10 and resistance at $81.10-81.70. In INR, crude oil is supported at ₹6,920-6,860 and resistance to ₹7,060-7,115,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.