Hopes for Middle East ceasefire put pressure on oil prices – Commerzbank

Oil prices have been under pressure since Friday, with prices down 5%. As a result, Brent fell to $77 a barrel in the morning and is now trading just about $2 above the 7-month low hit two weeks ago, notes Commerzbank commodities strategist Carsten Fritsch.

Hopes for a ceasefire in the Gaza Strip

“New hopes for a cease-fire in the Gaza Strip, which would also significantly reduce the risk of an Iranian retaliatory attack on Israel, are cited as the reason for the price decline. US Secretary of State Blinken, who is currently in Israel, described the current efforts as the best and possibly last chance for a ceasefire and urged the warring parties to yield.”

“However, based on the experience of the last few months, it is quite uncertain whether this will happen. It therefore seems premature to price the geopolitical risk premium. Another explanation for the current price weakness is demand concerns following the recent weaker data from China.”

“Furthermore, OPEC and the IEA cited weaker demand from China as the reason for the downward revision of oil demand. We think Friday’s price drop is overblown. An October OPEC+ oil production increase has now become even less likely. Therefore, we expect prices to recover soon.”