Oil Prices Stabilize as Hopes for Ceasefire in Middle East Surfaces

Oil prices steadied during Asian trading on Wednesday, with traders balancing Middle East tensions against ongoing bearish fundamentals. Brent crude futures rose by 11 cents (0.14%), reaching $77.29 per barrel, while U.S. West Texas Intermediate (WTI) futures increased slightly by 3 cents, settling at $73.60 per barrel. Following a significant drop of over 4% in the previous session due to the potential Hezbollah-Israel ceasefire, traders remain wary of a possible Israeli strike on Iran's oil infrastructure, which could escalate the conflict and impact the oil supply.

Macquarie analysts noted the potential for increased volatility as the market weighs risks posed by Middle East tensions against weak demand fundamentals. The recent Iran missile attack on Israel spurred an oil price rally, with an 8% weekly gain by Friday — the largest in over a year.

On the geopolitical front, Hezbollah’s deputy leader, Naim Qassem, expressed support for a conditional ceasefire in Lebanon, no longer requiring the end of the Gaza war for peace talks.

On the supply side, U.S. crude oil inventories rose by 11 million barrels last week, exceeding expectations. However, fuel stockpiles fell, reflecting weak demand. The U.S. Energy Information Administration (EIA) also downgraded its 2024 forecast for global oil demand growth to 103.1 million barrels per day (bpd), driven by slower industrial production and manufacturing growth in the U.S. and China.