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Oil Declines With Gaza Peace Plan and Risk-Off Mood in Focus - BLOOMBERG
BY Mia Gindis and Alex Longley
(Bloomberg) -- Oil edged lower as traders focused on cooling tensions in the Middle East and broader markets struck a more cautious tone.
West Texas Intermediate fell 1.7% to settle below $62 a barrel while Brent closed near $65. Israel has begun implementing a ceasefire deal in Gaza after it reached an agreement with Hamas for the the release of all the hostages it holds, a major step toward ending a two-year war that’s loomed over flows from the Middle East, the source of a third of the world’s crude.
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After a dip lower at the start of the month, crude has edged back toward the $62 to $67 band in which it traded for weeks at the end of the summer. The Organization of the Petroleum Exporting Countries and its allies are ramping up supplies, but so far the impact on prices has been limited by China hoarding barrels.
“Sentiment remains subdued, weighed down by concerns over a sizable fourth-quarter surplus and fears that Chinese crude buying is slowing,” said Rebecca Babin, a senior energy trader at CIBC Private Wealth Group. “Trading likely stays rangebound with a mild downside bias, particularly if broader risk assets come under pressure.”
The commodity also moved lower in tandem with wider markets without any strong new indicators on supply and demand. The dollar strengthened, making commodities priced in the currency less attractive.
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Offering a floor to prices, the US Treasury Department sanctioned more than 50 individuals, entities and vessels that “facilitate” Iranian oil and liquefied petroleum gas sales and shipments from the country. Traders will be following whether an end to fighting in Gaza will impact the status of restrictions against Iran, which backs Hamas.
Many Wall Street banks and other observers including the International Energy Agency have predicted the market will move into a major surplus in the coming months. Among them, Goldman Sachs Group Inc. expects Brent to average $56 next year as global production runs ahead of demand.
While consensus remains bearish given expectations for a surplus, “conviction differs on the depth of downside,” Citigroup Inc. analysts including Francesco Martoccia said in a note. Slower non-OPEC+ growth and greater OPEC+ optionality, along with geopolitical risks looming for large producers such as Russia and Iran, could temper the pace of price adjustment, they said.
--With assistance from Omar El Chmouri and Yongchang Chin.
