West Texas Intermediate touched above $74 a barrel on Friday but recorded a 5% weekly decline, while Brent also faced a similar trajectory. Ongoing talks for a Gaza ceasefire, although in early stages, are not anticipated to yield a breakthrough in the immediate future, according to insiders.
Despite hopes for progress in ceasefire negotiations, concerns linger over potential escalations in Middle East tensions. Houthi rebels from Yemen persist in targeting shipping in the Red Sea and Gulf of Aden. Additionally, the market awaits the U.S. response to a recent drone assault that claimed American lives in Jordan over the weekend.
Vishnu Varathan, an economist at Mizuho Bank Ltd., notes, “It’s no surprise that geopolitical risk premium placed on crude is fading as hopes of progress on Gaza ceasefire talks grow.” However, he cautions that resolving a conflict as entrenched and polarized as this is unlikely to follow a linear, unfettered, and quick path.
While oil experienced a monthly increase in January due to attacks on commercial shipping in the Red Sea, persistent concerns about robust supply and demand issues from key consumers have prevented prices from surging further. OPEC+ indicated on Thursday that it intends to maintain output cuts throughout the quarter.
According to a Bloomberg survey, OPEC reduced daily oil production by 490,000 barrels last month, signaling collective efforts to avert a global glut and support prices.
