Oil Plunges on Middle East Ceasefire Hopes

20 Aug 2024 , 09:16 AM

Oil prices fell on Tuesday after Israel agreed to a proposal to resolve issues that were impeding a ceasefire accord in Gaza, easing concerns about a Middle Eastern supply interruption.

Brent crude slipped 12 cents ($2.02), or 0.15%, to $77.54. Front-month U.S. West Texas Intermediate oil futures, which expire on Tuesday, were $74.23 per barrel, down 14 cents, or 0.2%. The more actively traded second-month contract was down 15 cents, or 0.2%, to $73.52.

Brent fell approximately 2.5% on Monday, while WTI dropped 3%.

U.S. Secretary of State Antony Blinken said on Monday that Israeli Prime Minister Benjamin Netanyahu has accepted a “bridging proposal” given by Washington to address issues preventing a ceasefire in Gaza, and urged Hamas to do the same.

However, with the Palestinian Islamist group announcing the resumption of suicide bombing inside Israel after many years and claiming responsibility for a blast in Tel Aviv on Sunday night, and medics reporting that Israeli military strikes killed at least 30 Palestinians in the Gaza Strip on Monday, there are few signs of conciliation on the ground and fears of wider war.

On the demand side, concerns about China’s economic troubles pushed oil prices upward. Following a poor second quarter, the world’s second-largest economy lost impetus in July, as new home prices plummeted at the highest rate in nine years, industrial output slowed, export and investment growth stalled, and unemployment increased.

Meanwhile, investors awaited word on the US Federal Reserve’s plans for the upcoming interest rate decision.

The Fed will reduce interest rates by 25 basis points at each of the remaining three sessions in 2024, one more than projected last month, according to a thin majority of economists polled by Reuters who believe a recession is unlikely.

For feedback and suggestions, write to us at [e-mail]