Oil prices experienced a decline on Friday as the possibility of a ceasefire in Gaza emerged, potentially easing geopolitical tensions in the Middle East. Additionally, a strengthening dollar and sluggish U.S. gasoline demand exerted further pressure on oil prices.
According to data, Brent crude futures fell by 53 cents, or 0.6%, to $85.25 a barrel, while U.S. crude futures dropped by 52 cents, or 0.6%, to $80.55 per barrel as of 0651 GMT. Both contracts are expected to close the week with marginal declines or remain flat after registering over 3% gains the previous week.
Analysts attribute the decline in oil prices to reports of a U.N. draft resolution advocating for a ceasefire in Gaza, along with profit-taking activities. IG analyst Tony Sycamore highlighted that a ceasefire could alleviate concerns about the potential escalation of the situation in Gaza and facilitate the passage of oil tankers through the Red Sea, thereby helping to rebalance supply and demand dynamics.
In response to the situation, U.S. Secretary of State Antony Blinken expressed optimism about the possibility of reaching a ceasefire agreement between Israel and Hamas through talks in Qatar. Blinken’s remarks followed discussions with Arab foreign ministers and Egyptian President Abdel Fattah El-Sisi in Cairo.
Meanwhile, in the United States, the world’s largest oil consumer, gasoline product supplied dipped below 9 million barrels for the first time in three weeks, signaling a potential slowdown in crude demand.
However, consultancy firm FGE noted encouraging preliminary weekly data for the first half of March, indicating a significant decline in crude and main product stocks at major oil hubs globally. This drop, nearly double the average draw from 2015 to 2019, could potentially support oil prices.
The strengthening of the U.S. dollar further weighed on oil prices, following a surprise interest rate cut by the Swiss National Bank, which boosted global risk sentiment. A stronger dollar typically makes oil more expensive for investors holding other currencies, leading to decreased demand.
In summary, the decline in oil prices was driven by multiple factors, including prospects of a Gaza ceasefire, sluggish U.S. gasoline demand, and a stronger U.S. dollar, highlighting the complex interplay of geopolitical events and economic factors impacting global oil markets.