Oil prices declined in early trading Thursday after reports confirmed that Israel and Hamas had agreed to the first phase of a Gaza ceasefire plan to end the two-year conflict in Gaza. The development reduced geopolitical risk premiums that had supported crude prices in recent months.
Brent crude futures fell 51 cents, or 0.77%, to $65.74 a barrel by 12:02 a.m. GMT. U.S. West Texas Intermediate (WTI) crude dropped 55 cents, or 0.88%, to $62 a barrel.
The U.S. government announced that both sides had reached an initial agreement designed to de-escalate tensions and allow for the release of hostages. According to official statements, the Gaza ceasefire plan will be reviewed and approved by Israel’s cabinet on Thursday.
Analysts noted that the ceasefire could reduce the risk of broader regional disruption, which has been priced into oil markets since the conflict began. “The market reaction reflects a recalibration of risk expectations,” one energy strategist said, citing the reduction in geopolitical uncertainty.
U.S. demand shows strong growth
While geopolitical factors drove short-term volatility, data from the Energy Information Administration (EIA) highlighted resilient demand in the United States. Total weekly U.S. petroleum products supplied — a proxy for domestic consumption — rose to 21.99 million barrels per day last week, the highest level since December 2022.
The report indicated steady industrial activity and robust transportation fuel demand despite inflationary pressures. Analysts said these figures underscored a strong baseline for consumption that could support prices even as geopolitical risk premiums decline.
“Demand fundamentals remain constructive,” an EIA report summary stated. “However, the market continues to adjust to new geopolitical signals.”
Market outlook remains cautious
Oil prices had briefly gained about 1% on Wednesday after investors assessed that limited progress in Ukraine peace talks might maintain existing sanctions on Russia. However, the impact of the Gaza ceasefire plan outweighed those gains, shifting market focus toward stability in the Middle East.
Market participants observed that if the gaza ceasefire plan holds, the oil market could enter a period of reduced volatility. Energy consultants suggested that Brent and WTI may trade within a narrow range as traders await confirmation of the agreement’s implementation.
The broader outlook will depend on the pace of regional developments and global demand trends. For now, reports indicate that easing tensions have lowered the immediate risk to supply from the Middle East, while solid consumption in the U.S. provides some support for prices.
As of Thursday morning, crude markets remained steady, with participants monitoring both geopolitical progress and upcoming inventory data for further direction.
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