Oil prices dropped on Thursday following an agreement between Israel and Hamas on the first phase of a plan to end the Gaza conflict, easing geopolitical tensions in the Middle East. Meanwhile, the strength of the U.S. dollar pressured commodities.
Brent crude futures fell by 34 cents, or 0.51%, to $65.91 per barrel at 0413 GMT. U.S. West Texas Intermediate(WTI) crude dropped 38 cents, or 0.61%, to $62.17.
"WTI crude is trading on the weaker side of the pendulum today due to a reduction in geopolitical risk premium triggered by the Israel-Hamas peace deal," OANDA's senior market analyst Kelvin Wong said.
U.S. President Donald Trump said that Israel and Hamas had reached a long-sought deal for a Gaza ceasefire and hostage release under a plan for ending the two-year-old war in the Palestinian enclave.
Israeli Prime Minister Benjamin Netanyahu said he would convene the government on Thursday to approve the ceasefire agreement.
The war in Gaza has supported oil prices as investors have weighed the potential risk to global oil supply if the war were to develop into a wider regional conflict.
Michael McCarthy, CEO of investor platform Moomoo Australia and New Zealand, said the Gaza ceasefire is unlikely to change oil supply in the Middle East as OPEC+ has not hit its increased production targets.
The group, made up of the Organization of the Petroleum Exporting Countries and allies, agreed on Sunday to a November output hike that was smaller than market expectations, easing oversupply concern.
McCarthy also said the U.S. dollar's strength against the Japanese yen and euro is generally weighing on commodities. Dollar-denominated oil has become more expensive for investors holding other currencies.
Prices had gained around 1% on Wednesday to reach a one-week high after investors viewed stalled progress on a Ukraine peace deal as sustaining sanctions against Russia.
Meanwhile, total weekly U.S. petroleum products supplied, a proxy for U.S. oil consumption, rose last week to 21.990 million barrels per day, the most since December 2022, showed a report from the Energy Information Administration on Wednesday.
JP Morgan analysts said global oil demand began on a softer note in October as numerous consumption indicators, including container arrivals at the Port of Los Angeles, truck toll mileage in Germany and container throughput in China, pointed to a moderation in activity.
Global oil demand averaged 105.9 million bpd in the first seven days of October, expanding by 300,000 bpd from last year's level and 90,000 bpd lower than JP Morgan's estimates, its analysts said in a client note.
The pace of global crude and products inventory build has also slowed, expanding by 8 million barrels last week, the slowest increase in the past five weeks, they said.
Source: Reuters
Bd-pratidin English/ ANI
