Oil Plummets On Renewed Assumptions That Gaza Ceasefire Is Imminent

Meanwhile, Washington investigates for collusion between energy firms and OPEC: File Image/Pixabay

On the strength of Washington again expressing hope for a ceasefire in Gaza, oil on Friday plummeted by over 3 percent – and sustained another round of weekly losses amid a generally bearish outlook on demand.

Brent settled down $2.48 to $82.63 per barrel, while West Texas Intermediate settled down $2.69 to $80.13.

The plunge on Friday kicked in after U.S. Secretary of State Antony Blinken said regarding the hostilities between Israel and Hamas, "I believe we're inside the 10-yard line and driving toward the goal line in getting an agreement that would produce a ceasefire, get the hostages home and put us on a better track to trying to build lasting peace and stability."

Taking Blinken's word at face value, Tim Snyder, chief economist at Matador Economics, said, "Geopolitics is starting to ease just a little bit so that ought to work in our favour, following the news of this ceasefire."

However, it's questionable whether the hostilities will end, and in the meantime the global market remained mired in doldrums, spurred by China's economy growing by a slower-than-expected 4.7 percent in the second quarter; also pressuring prices was stronger-than-expected data on the U.S. labour market and manufacturing this week.

Bloomberg summarized the climate by stating, "The air is being sucked out of the oil market, with prices collapsing on Friday in the face of dwindling volume and volatility: the lifeblood of crude traders."

However, the news agency pointed out that "Still, WTI's prompt spread — the price difference between its two nearest contracts — is in backwardation: the bullish pattern signals demand is outweighing supply in the short term."

In other oil news on Friday, the U.S. Federal Trade Commission reportedly was focusing on communications between executives at major firms including as Hess Corp., Occidental Petroleum Corp., and Diamondback Energy Inc. to determine if they improperly coordinated with the Organization of the Petroleum Exporting Countries (OPEC) and therefore violated antitrust laws.

Such coordination, if proven, could lead to higher oil prices and less competitive markets.

Also on Friday came news that Russia's four-week average seaborne oil exports fell to 3.11 million barrels per day (bpd) as of July 14, down by almost 600,000 barrels or 17 percent from their peak in April; China and India will supposedly be most likely to feel the cuts because they buy more than 80 percent Russian seaborne crude sales.

Rystad Energy predicted that the crude flows will remain capped at around 2.7 million bpd in July and August but inch up to 2.9 million bpd in September when refineries begin their autumn maintenance.