Oil prices are dropping after rising for 4 weeks as the prospect of a ceasefire agreement in Gaza eased geopolitical tensions in the Middle East, while investors assessed potential disruptions to US energy supplies due to Tropical Storm Beryl.
Brent crude futures were down 12 cents, or 0.1 per cent, to $86.42 a barrel as of 02.34 GMT.
US West Texas Intermediate crude was down 28 cents, or 0.3 per cent, to $82.88 a barrel.
Israel and Palestine are negotiating a US-brokered ceasefire plan aimed at ending the nine-month war in the Gaza Strip. Qatar and Egypt are acting as mediators. IG analyst Tony Sycamore said:
If the ceasefire talks bring something concrete, it will remove some of the geopolitical risks.
Impact of natural disasters on oil prices
The ports of Corpus Christi, Houston, Galveston, Freeport and Texas City were closed Sunday to prepare for Tropical Storm Beryl, which could become a Category 2 hurricane after making landfall in the middle of the Texas coast between Galveston and Corpus Christi on Monday.
Port closures could temporarily halt crude oil and liquefied natural gas exports, crude oil shipments to refineries and motor fuel deliveries from those refineries. ING analyst Warren Patterson said in a note:
While this jeopardises offshore oil and gas production, the primary concern when the storm makes landfall is the potential impact on refinery infrastructure. Any significant disruption to refinery operations in Texas would likely exacerbate difficulties in the refined products market.
According to IG’s Sycamore, there is also a high probability that the data will point to another significant weekly drawdown in US oil inventories amid the peak of the motoring season, which will support oil prices.
WTI crude oil rose 2.1% last week after data from the Energy Information Administration showed that crude oil and refined product inventories fell in the week ended June 28. Sycamore said, adding that technical charts suggest the benchmark grade could meet strong resistance between $85.50 and $87.50:
WTI prices are up 15% from their early June lows.
The number of active oil rigs in the United States was unchanged last week at 479, remaining at its lowest level since December 2021, Baker Hughes said in its weekly report on Friday.
Oil prices last week were also supported by hopes of lower interest rates, Sycamore said, after data released Friday showed weakening inflation and slowing US job growth. Lower interest rates could stimulate economic activity and boost demand for crude oil.
Investors were also keeping an eye on how last week’s elections in the UK, France and Iran would affect geopolitics and energy policy.
