Oil prices fall as hopes of Middle East ceasefire ease supply concerns

By Arathy Somasekhar

(Reuters) – Oil prices fell on Tuesday as Israel accepted a proposal to address disagreements blocking a Gaza ceasefire deal, helping ease concerns about a supply disruption in the Middle East.

was down 12 cents, $2.02, or 0.15%, at $77.54. U.S. West Texas Intermediate crude futures for the first month, which expire on Tuesday, were at $74.23 a barrel, down 14 cents, or 0.2 percent. The more actively traded second-month contract was down 15 cents, or 0.2 percent, at $73.52.

Brent fell about 2.5 percent on Monday, while WTI fell 3 percent.

US Secretary of State Antony Blinken said on Monday that Israeli Prime Minister Benjamin Netanyahu had accepted a “bridging proposal” put forward by Washington to address disagreements blocking the Gaza ceasefire agreement and urged Hamas to do the same.

However, with the Palestinian Islamist group announcing a resumption of suicide bombings in Israel after many years and claiming responsibility for an explosion in Tel Aviv on Sunday night, and medics saying Israeli military strikes killed at least 30 Palestinians across the Gaza Strip on Monday, there is little sign of reconciliation on the ground and fears of wider war.

Also easing supply concerns, output from Libya’s Sharara oil field rose to about 85,000 barrels a day in a move aimed at supplying the Zawia oil refinery, two engineers working at the field told Reuters on Monday.

Libya’s National Oil Corporation (NOC) declared force majeure on oil exports from the field on August 7 after a blockade by protesters affected the field’s 300,000 bpd output.

In the United States, crude stockpiles were expected to have fallen by 2.9 million barrels last week, a preliminary Reuters poll showed on Monday.

On the demand side, concerns over China’s economic woes also weighed on oil prices. After a dismal second quarter, the world’s second-largest economy lost steam again in July as new home prices fell at their fastest pace in nine years, industrial production slowed, export growth and investment fell and unemployment rose.

Meanwhile, investors also awaited indication of the US Federal Reserve’s plans for its next interest rate decision.

The Fed will cut interest rates by 25 basis points at each of its three remaining meetings in 2024, a bigger cut than it anticipated last month, according to a slim majority of economists polled by Reuters, who said a recession was little probable.

Fed members Mary Daly and Austan Goolsbee over the weekend signaled the possibility of easing in September, while minutes from the latest policy meeting, due this week, should highlight a dovish outlook.

Fed Chairman Jerome Powell speaks in Jackson Hole on Friday and investors assume he will concede the case for a cut.

Rate cuts reduce borrowing costs and could boost oil demand in the world’s biggest oil-consuming country.

A looming labor dispute at Canada’s two main railways is unlikely to significantly reduce oil exports or disrupt production in Canada because of excess capacity on the Trans Mountain and other pipelines, people close to the matter said.