Oil Extends Losses Over Ceasefire Optimism Despite Vowed Attack On Rafah

by Ship & Bunker News Team
Tuesday April 30, 2024

As of 15:31 GMT on Tuesday, oil extended its losses due to cautious optimism that a ceasefire between Israel and Hamas will be reached, and also due to growing crude output in the U.S.

Brent by 15:31 was down 52 cents at $87.88 per barrel, while West Texas Intermediate was down 54 cents at $82.07.

According to the Energy Information Administration, production in the U.S. rose to 13.15 million barrels per day (bpd) in February from 12.58 million bpd in January, while exports rose to 4.66 million bpd from 4.05 million bpd in the same period.

Traders’ optimism regarding the peace talks was curious, given that Israeli prime minister Benjamin Netanyahu on Tuesday stated that the long-awaited assault on Rafah in southern Gaza would proceed; but Dennis Kissler, senior vice president of trading at BOK Financial, explained, "We're not seeing any global supply being taken off the market.

"Traders believe some of the geopolitical risk is being taken out of the market."

Bloomberg pointed out that with Tuesday’s trading, WTI was oil was testing its 50-day moving average of about $81.80: “The level has provided technical support for prices, and a decisive drop below it may accelerate selling.”

Meanwhile, all eyes in the west are focused on a 2-day monetary policy meeting by the Federal Reserve Open Market Committee, which is expected to end on Wednesday with a decision to leave bank rates as is –a prospect that worried Yeap Jun Rong, market strategist at IG.

He noted that freezing the rates instead of lowering them as had previously been expected could boost the U.S. dollar and threaten oil demand: "The upcoming Fed meeting drives some near-term reservations."

For his part, Phil Flynn, senior market analysts at Price Futures Group Inc., said traders are increasingly pricing in the prospect of the Fed raising interest rates again instead of maintaining them:  “You’ve got the stagflationary environment….the market is pricing in the Fed fears that they’re going to come out a lot more hawkish.”