U.S. crude oil futures dropped more than 1% on Friday, influenced by ongoing Gaza cease-fire negotiations and global demand uncertainties. Reports indicate that Qatar has urged Iran to avoid escalating tensions with Israel while peace talks are underway in Doha.
Qatar’s Prime Minister reportedly warned Iranian leaders against attacks on Israel, emphasizing the potential consequences of such actions during the critical period of negotiations. This diplomatic move aims to de-escalate the situation as the cease-fire discussions continue.
For the week, the U.S. benchmark West Texas Intermediate (WTI) saw a slight decline of 0.25%, ending at $76.65 per barrel, down $1.51 or 1.93%. In contrast, the global benchmark Brent crude rose marginally by 0.03%, closing at $79.68 per barrel. Despite Friday’s drop, U.S. crude oil has gained 6.98% year-to-date, while Brent is up 3.43%.
Here are the closing prices for major energy contracts on Friday:
- West Texas Intermediate (WTI): September contract at $76.65 per barrel, down $1.51 (1.93%).
- Brent Crude: September contract at $79.68 per barrel, down $1.36 (1.68%).
- RBOB Gasoline: September contract at $2.31 per gallon, down more than 4 cents (2.03%).
- Natural Gas: September contract at $2.12 per thousand cubic feet, down 7 cents (3.37%).
The cease-fire talks were temporarily suspended on Friday, with negotiations expected to resume next week. Hamas was not directly involved but received updates from mediators. A senior Hamas official stated that Israel had not adhered to previous agreements, adding to the volatility of the situation.
Daniel Ghali, senior commodity strategist at TD Securities, noted that the risk premium in the energy markets is diminishing as traders appear to downplay geopolitical risks. This comes after a significant 4% surge in U.S. crude oil prices earlier in the week due to fears of an imminent conflict between Iran and Israel. The market has since adjusted as the anticipated attack has not occurred and concerns over weaker oil demand in China persist.
Phil Flynn, senior market analyst at the Price Futures Group, observed that market sentiment is shifting towards a belief that global demand growth might be weaker than previously expected. This sentiment is compounded by OPEC’s reduced forecast for 2024 oil demand.
Matt Smith, lead oil analyst for the Americas at Kpler, explained that the current price movements reflect a balance between fundamental market conditions and geopolitical factors. The recent price drop is attributed to the ongoing Middle Eastern negotiations and the absence of Iranian retaliation.
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