Oil Prices Ease on Renewed Push for a Middle East Ceasfire

Oil prices fell this week, ending a multi-session rally after Israel reduced its troops in southern Gaza and began a fresh round of ceasefire talks with Hamas.

 

Israel and Hamas opened a fresh round of Gaza ceasefire talks on Sunday, but a Hamas official said the talks remained deadlocked. Both benchmarks slumped by more than $2 during the session, with investors focusing on Israel’s decision to withdraw more soldiers from southern Gaza.

 

Israel’s decision “has reduced somewhat the geopolitical risk premium,” UBS analyst Giovanni Staunovo said.

 

Also weighing on oil prices were expectations that U.S. crude oil stocks likely rose last week, Staunovo said.

 

Crude oil benchmarks bounced off session lows after Israeli Prime Minister Benjamin Netanyahu said a date was set for an invasion of Rafah, indicating the conflict is far from resolved, said Andrew Lipow, president of Lipow Oil Associates.

 

The decline in oil prices is also capped by uncertainty around how Iran will respond to the bombing of its consulate in Syria last week, he added.

 

Tehran has said it will take revenge, feeding concern that the Middle East conflict could broaden. Crude benchmarks jumped 4% last week, with Brent futures rising for the fourth consecutive week – the longest rally since August last year.

 

Among factors affecting oil’s demand outlook, a U.S. employment report on Friday suggested the economy ended the first quarter on solid ground, which could prompt the Federal Reserve to delay interest rate cuts.

 

Investors will scour consumer price index data from the U.S. and China this week for further clues on economic health of the world’s top two oil consumers.

 

As we head into next week Fuel card users can a expect a price drop in the region of 1 – 1.5 pence per litre depending on their card type.

Oil Prices Set for a Second Weekly Gain After Brent Breaks $91

Crude oil prices were on track to book their second weekly gain in a row, driven higher by geopolitics and supply concerns.

 

The rally in oil prices came amid reports that Russia may have temporarily lost as much as 15% of its refining capacity because of Ukrainian drone attacks and Iran vowed to exact revenge on Israel for the strike of its consulate in Damascus.

 

“Oil prices look set for further upside in the short term as a more positive economic backdrop is joined by ongoing supply tightness and rising geopolitical risks,” analysts from ANZ said, as quoted by Reuters, revising their three-month price forecast for Brent crude to $95 per barrel.

 

The wider Mideast tensions stemming from the Gaza war are probably at the highest in months,” Vandana Hari, founder of Vanda Insights, told Bloomberg. “Crude is reflecting that Mideast conflagration fear premium.”

The latest from the Middle East is the news that the UAE is growing cold to Israel after several years of normalized relations. The reason for the change in attitude was the Israeli strike that killed seven aid workers in Gaza. Some reports said the Emirates were “outraged” with the event.

 

Demand for oil, meanwhile, remains quite healthy, with the latest U.S. weekly inventory report revealing declines in both gasoline and middle distillate stocks. This demand is set to rise further, especially in middle distillates as the manufacturing industry in the country gathers momentum, Reuters’ market analyst John Kemp wrote in a recent column.

 

While this is happening, OPEC+ reaffirmed its commitment to production limits at its latest meeting earlier this week. Even though there were overproducers again, prices rose after the meeting because the group signalled it was about to get those overproducers in line, demanding compensation for their excess production.

 

As we move into the second week of April fuel cards prices will see a hefty increase in the region of 2.5 pence per litre depending on card type.

Oil Prices Hedge Higher Over Tighter Supply Concerns

Oil prices have surged over the past week as signs of increased U.S. refinery activity, improved Chinese demand and persistent disruptions in the Middle East presented a tight outlook for oil markets.

 

This notion was furthered by Iraq, the second biggest producer in the Organization of Petroleum Exporting Countries, stating that it will cut crude exports to compensate for higher production so far in 2024.

 

“The move is primarily to absorb the oversupply from Jan’24-Feb’24 and to showcase the nation’s commitment to stick to its voluntary oil cuts as part of the OPEC+ agreement,” according to analysts at ING, in a note.

 

“Recent OPEC numbers showed that Iraq pumped 0.2m b/d of oil above its agreed quota of 4m b/d last month.”

 

Data from Saudi Arabia also showed crude exports from OPEC’s biggest producer fell for a second straight month in January. In Russia, Ukrainian attacks put a key fuel refinery out of commission.

 

Signs of tighter supplies also come amid some improving economic indicators from major crude consumers, specifically China. The country’s industrial production and fixed asset investment grew more than expected in the first two months of 2024, while travel demand also recovered to pre-COVID levels during the Lunar New Year holiday.

 

It remains to be seen whether China can carry this momentum into the coming months, especially as consumer spending still remains weak. 

 

Fuel card users can expect an increase in the region 1.5 -2 pence per litre for next week as we head towards the Easter holidays.

 

Oil Prices Fall as China Fails to Impress Markets.

Oil prices were mixed this week as the International Energy Agency warned of a potential supply deficit throughout the year applying upward pressure on oil prices. However, this was largely offset by demand concerns out of China which dampened the momentum.

 

Brent crude traded above $84.50 a barrel to the highest intraday level in six weeks. The IEA reversed its previous expectations of a surplus as OPEC+ looks set to continue output cuts in the second half of the year.

 

There could still be a surplus in the second half, “depending on when the alliance does unwind the cuts, by how much, and the pace of it,” Toril Bosoni, head of the agency’s oil market division, said in an interview with Bloomberg TV.

 

The IEA bolstered forecasts for world oil demand growth in 2024 by 110,000 barrels to 1.3 million barrels a day, on a stronger US outlook and the increased need for ship fuel, as vessels take longer routes to avoid Houthi attacks in the Red Sea.

 

In the US, inventories dropped for the first time in seven weeks, including a fall at the hub in Cushing, Oklahoma. Meanwhile, geopolitical tensions remain elevated after this week’s Ukrainian drone strikes on Russian oil refineries.

 

Ukraine struck oil refineries in a second day of heavy drone attacks, causing a fire at Rosneft’s biggest refinery in what Russian President Vladimir Putin said was an attempt to disrupt his country’s presidential election this week.

 

“As Russian refining capacity is damaged by Ukrainian drone strikes, this can result in Russia exporting less diesel fuel with a potential for Russia to start importing petrol and that of course will affect prices around the world,” said Andrew Lipow, president of Lipow Oil Associates in Houston.

 

Oil and the wider financial markets also found support from sentiment that the latest data on US inflation will not derail interest rate cuts by midyear.

 

Lower rates can boost economic growth and support oil demand. The Organization of the Petroleum Exporting Countries, meanwhile, stuck to its forecast for oil demand growth of 2.25 million barrels per day in 2024, higher than many other forecasts.

 

Meanwhile in China oil demand was firmly back in the spotlight as worries over weak demand outweighed the bullish sentiment from the US.

 

The worries came after the research arm of state-owned Chinese energy major CNPC forecast last week that China is entering a slow oil demand period thanks to the uptake of electric cars and LNG-fuelled trucks.

 

Growth in EV sales and LNG-powered trucks would shave between 10% and 12% off the country’s demand for gasoline and diesel just this year, Lu Ruquan, president of CNPC’s Economics and Technology Research Institute, said last Friday

 

The mixed outlook offers some good news for fuel card users as prices are expected to fall in the region of .70 pence per litre for next week.

Oil Prices Fall as China Fails to Impress Markets.

Crude oil prices have fallen slightly this week as China’s latest economic revival plans seemed to underwhelm investors as the demand outlook remains weak.

 

Worries about Chinese energy demand have been a problem for oil traders as the world’s number two economy struggles to regain anything like its pre-pandemic vigour. Beijing has announced its intentions to ‘transform’ its development mode, and address endemic overcapacity, but its 2024 growth target of 5% perhaps only served to remind investors that China remains in the slow lane, by its recent standards.

 

The Organization of Petroleum Exporting Countries and its allies (the ‘OPEC+’ group) have extended production cuts into this year’s second quarter. Still, that move was widely expected and didn’t affect prices much. More broadly the market remains caught between the prospect of plentiful supply from non-OPEC producers, and uncertain demand as the industrialised economies struggle with meagre growth or, in some cases, outright recession.

 

Prices are finding some support as Federal Reserve Chair Jerome Powell said yesterday that the US central bank was “not far” from gaining enough confidence that inflation is falling sufficiently to begin cutting interest rates. Typically lower interest rates raise consumer confidence and households buying power, increasing demand for goods and services in turn increasing oil demand.

 

Jeremy Hunt on Wednesday announced an extension of the 5p cut in fuel duty brought in during 2022, the extension will provide some relief to motorists who saw the cost of petrol soar to £1.91 per litre in June 2022. That has now fallen to £1.45 per litre, which remains well above a low of £1.01 in 2016, according to the RAC.

 

Fuel card users can expect another fall in fuel prices for next week in the region of .30 pence per litre.

Oil prices continue to slide US stockpiles mount

Oil prices experienced a downturn this week as concerns stemming from a significant increase in U.S. crude stockpiles coupled with exacerbating worries about sluggish demand globally.  Additionally, apprehensions surrounding the likelihood of sustained elevated interest rates in the United States for longer dampened the market.

 

Traders have tempered expectations for imminent rate cuts following robust economic data, including elevated consumer and producer price indicators. With the possibility of an easing cycle now pushed back to June, compared to previous projections for March, investors are bracing for continued high borrowing costs that could potentially stifle economic growth and in turn oil consumption, arguably the same outlook now appears more likely for UK interest rates.

 

While geopolitical tensions in the Middle East have previously supported oil prices, uncertainty persists regarding the impact on global supply dynamics. Meanwhile, analysts anticipate that OPEC+ may extend voluntary output cuts in response to the evolving demand landscape. This may provide some support to prices amidst ongoing uncertainty.

 

OPEC initially agreed to reduce combined supply by 2.2 million bpd over the first quarter of the year and meet in early March to decide whether it should extend the cuts for another quarter. Given the tight range that oil has been trading in amid multiple headwinds, the extension was virtually a certainty.

 

Some observers even expect OPEC+ to extend the cuts until the end of the year, which has lent support to prices on expectations that this would bring the oil market closer to a shortage.

 

Therefore the outlook for oil process remains fairly mixed as we enter Match, an the first month of Spring but the welcome news for fuel cards users is that a further fall in the region of 1.2 pence per litre can be expected next week.

Oil prices ease as demand concerns take hold

Oil prices retreated slightly this week amid persistent concerns over a looming demand slowdown, which largely offset fears of potential supply disruptions from new attacks in the Red Sea. 

 

The Yemen-based, Iran-aligned Houthi group claimed responsibility for an attack on an oil tanker in the Red Sea, presenting little de-escalation in geopolitical instability in the Middle East. 

 

A growing conflict in the Middle East, especially in the wake of the Israel-Hamas war, has been a key point of support for oil prices, especially as fighting in the Red Sea pointed to delayed oil deliveries to several parts of Asia and Europe. 

 

However, the market has started the new week on the back foot on concerns over sluggish demand, especially in the face of higher for longer U.S. interest rates and worsening economic conditions across the globe.

 

Stronger-than-expected U.S. consumer and producer inflation data released last week ramped up concerns that the Federal Reserve will have little impetus to cut interest rates early in 2024. 

 

Higher rates bode poorly for crude demand, given that they stifle economic activity. 

 

The International Energy Agency had last week warned of a demand slowdown in 2024, with the warning coming just as data showed the U.K .and Japan entering a recession. 

 

As we head into the final week of February fuel cards users can expect a welcome reduction in the region of 2ppl

Lack of Progress in the Middle East Keeps Oil Prices Higher.

Oil prices are set for another weekly gain after clocking volatile swings throughout the week. Higher-than-expected US inflation data have capped this week’s pricing upside as tensions in the Middle East continue to remain intensified amidst several failed mediation attempts to bring about a ceasefire in the Israel-Palestine conflict.

 

Whilst any price increase is unwelcome, the short-term outlook for oil prices remains somewhat downbeat, especially after an IEA report on Thursday which said that global oil demand was slowing. The organisation trimmed its 2024 global oil growth forecast to 1.22 million barrels per day (bpd) from 1.24 million bpd. 

 

The agency also forecast higher supplies in 2024 amid record-high U.S. production and reluctance among members of the Organisation of Petroleum Exporting Countries to enact deeper supply cuts.

 

Recession signals from the world’s biggest economies also caused markets some concern for global oil demand this year. Both the UK and Japan entered a technical recession in the fourth quarter of 2023, GDP data showed on Thursday. Eurozone GDP growth was unchanged in the fourth quarter after the bloc also entered a recession in the third quarter. 

 

The readings factored into concerns that slowing economic growth will pull down oil demand in the coming months. Top importer China is also grappling with a sluggish economic rebound, although the week-long Lunar New Year holiday is expected to offer some support. 

 

On the supply front, inventory data released earlier in the week showed a massive jump in U.S. crude stockpiles, as production rebounded to record highs, at above 13 million bpd. Strong U.S. production is expected to largely plug any supply gaps from the OPEC, as well as potential supply disruptions arising from the Middle East. 

 

Fuel card users can expect a further increase in prices for next week in the region 3 pence per litre depending on card type.

 

Oil Heads Higher after Israel Rejects a Ceasefire Offer

After a weak start to the week, crude oil appear set for another weekly gain after the news broke that Israel has rejected a ceasefire offer from Hamas.

 

Israeli Prime Minister Benjamin Netanyahu said there was “no other solution than total victory,” which contributed to the bullish oil sentiment. According to Bloomberg, oil’s gains this week have offset almost all of the losses from last week, which were prompted by hopes for a ceasefire.

 

The tensions have kept oil prices elevated, with Brent and WTI both set to gain more than 5% for the week.

 

U.S. officials made their most pointed criticism so far of Israel’s civilian casualties in Gaza as it turned the focus of its offensive to Rafah.

 

A Hamas delegation arrived in Cairo on Thursday for ceasefire talks with mediators Egypt and Qatar.

 

Prices also found support this week after the U.S. Energy Department forecast that domestic crude production would grow slower than originally expected this year, easing worries among traders that the global market is oversupplied.

 

While the conflict has propped up prices, there has been no real impact on oil production.

 

Non-OPEC output from Norway and Guyana is increasing while Russia is exporting more crude in February than it planned under an OPEC+ deal, following a combination of drone attacks and technical outages at its refineries.

 

Fuel card user can expect prices for next week to remain the same as this week with minimal price movement.

Oil Prices Hedge Higher as Drone Strikes Kill US Military.

Oil prices remain elevated this week after an Iran-backed drone strike killed three U.S. service members in northern Jordan, adding to supply disruption concerns.

 

West Texas Intermediate (WTI) crude—one of the main three benchmarks in oil pricing—opened the week higher but pared earlier gains, potentially setting the stage for heightened volatility in energy markets as tensions in the region escalate.

 

Following the attacks, President Joe Biden said that the United States will hold those responsible to account. RBC Capital said in a research note cited by Reuters that the deaths represent “a critical inflection point in the ongoing conflict in the Middle East and raises a spectre of a more substantial U.S. involvement in the war.” The bank added that heightened tensions between Washington and Tehran threatened to cause further regional supply disruptions.

 

The drone strike last weekend came after Yemen Houthi rebels launched missiles at a fuel tanker last Friday that sparked an onboard fire. Up until this point, attacks by Houthi militants have primarily targeted container vessels transiting the Red Sea. These strikes raised worries that rebels could intensify attacks on oil tankers in coming weeks, further disrupting global energy supplies.

 

In addition, oil prices remain well supported on the demand side after a better-than-expected reading on U.S. economic growth last week and expectations of Chinese stimulus to curb a slowdown in the world’s largest oil importing nation.

 

Today (Friday) oil prices have eased and are trading lower on unverified reports that Israel has agreed to a ceasefire proposal. Bloomberg previously reported that talks were progressing towards a deal to temporarily halt the Israel-Gaza conflict and release civilian hostages held by Hamas. If this proves to be the case then the upward momentum we have seen recently in oil prices may show some signs of a reversal.

 

Fuel card customers can expect an increase in the region of 1.2 pence per litre for next week. 

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