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On Thursday, crude oil futures took a downward turn following differing news reports on a potential ceasefire between Israel and Hamas. The conflicting reports have stirred up uncertainty in the oil market.
Initially, Al Jazeera reported that Israel had agreed to a ceasefire, but later deleted the post, stating that Hamas had received a ceasefire proposal “in a positive atmosphere.” Subsequently, Bloomberg reported that negotiations were in the early stages, with a breakthrough not expected in the near future.
The ceasefire reports appeared to have a significant impact, sending crude prices sharply lower initially. However, the losses were partially recovered before fading again. The uncertainty was compounded by the shutdown of the largest refinery in the U.S. Midwest.
BP announced on Thursday afternoon that it was closing its 440,000-barrel-per-day Whiting, Indiana, refinery due to a power outage, adding to the market’s apprehension.
Moreover, the meeting of OPEC’s Joint Ministerial Monitoring Committee via videoconference did not result in any recommendations for changes to current production cuts for the current quarter, adding to the existing market uncertainty. The committee is scheduled to convene again on April 3.
The closure of the market showed front-month Nymex crude (CL1:COM) for March delivery settling at -2.7% to $73.82 per barrel, while front-month April Brent crude (CO1:COM) closed at -2.3% to $78.70 per barrel, signifying a notable downward shift.
Market analysts expressed varying perspectives on the potential impact of geopolitical events on oil prices. “A ceasefire would certainly call into question if and when the Biden administration will respond for the killing by an Iranian-backed militia of three U.S. servicemen” in Jordan, according to Mizuho’s Robert Yawger. Meanwhile, Citi analysts noted that geopolitical tensions supporting higher crude prices may soon give way to a more bearish fundamental outlook.
“While risks from Ukraine drone attacks on Russian oil facilities and the prospect for a decisive U.S. response to the attacks of U.S. troops in Jordan could temporarily prop up oil prices, ‘we still expect medium-term oil market fundamentals to get looser, putting downside pressure on oil prices,’ Citi said. They also highlighted Saudi Arabia’s decision not to raise its production capacity, suggesting that OPEC+ ‘has recognized it has a problem with rising spare capacity and has limited room to raise production in the next few years.'” acknowledged Citi analysts.
Overall, the oil market is navigating through a climate of uncertainty driven by geopolitical tensions, market dynamics, and cautious optimism regarding potential ceasefire negotiations between Israel and Hamas. These factors have contributed to a notable shift in crude oil prices and are likely to influence market sentiment in the days ahead as the industry adapts to evolving global events.