Global oil prices fell sharply on Friday, reaching their lowest levels in several months, as geopolitical risk premiums unwound following a breakthrough ceasefire deal between Israel and Hamas aimed at ending the prolonged conflict in Gaza.
Brent crude futures dropped $1.73, or 2.7%, to settle at $63.49 per barrel, having earlier touched an intraday low of $63.27, the weakest level since early June. U.S. West Texas Intermediate (WTI) fell $1.71, or 2.8%, to $59.80, after dipping as low as $59.57, its lowest price since May.
Latest oil prices:
WTI CRUDE 59.35 -3.51%
BRENT CRUDE 63.12 -3.22%
MURBAN CRUDE 64.74 -3.10%
NATURAL GAS 3.150 -3.64%
The losses cap a volatile week for energy markets, which had briefly rallied midweek amid fears of prolonged conflict in Ukraine but reversed course as diplomatic progress in the Middle East calmed supply disruption fears.
“The possibility of a durable peace process in the Middle East has significantly eased market concerns,” said Bjarne Schieldrop, Chief Commodities Analyst at SEB Bank. “Fears over disruptions to oil tanker traffic through the Suez Canal and the Red Sea have lessened, restoring a degree of investor confidence.”
The ceasefire agreement, the first phase of a U.S.-backed peace initiative, was signed Thursday by Israel and Hamas, with formal approval from the Israeli government coming early Friday. The deal mandates a temporary halt to fighting, a partial Israeli withdrawal from Gaza, and the release of all remaining hostages in exchange for hundreds of Palestinian prisoners.
Alongside easing geopolitical tensions, oil markets are increasingly responding to signals of a potential supply glut. Analysts expect crude supplies to exceed demand in Q4, particularly as the Organization of the Petroleum Exporting Countries and its allies (OPEC+) begin to gradually ease production cuts.
“The focus is now shifting back to fundamentals,” said Daniel Hynes, Senior Commodities Strategist at ANZ. “A ceasefire in Gaza has removed a key upside risk, and with OPEC+ agreeing to a modest production increase in November, supply concerns are re-emerging.”
A research note from BMI analysts reinforced that sentiment, saying: “While expectations of a dramatic supply surge haven’t materialized, the latest decline reflects a blend of political easing and economic uncertainty.”
Brent and WTI are both down around 1.7% and 1.9% respectively for the week.
Further weighing on crude is anxiety over a potential U.S. government shutdown, which could dent economic momentum and reduce demand from the world’s largest oil consumer. Investors remain wary of the macroeconomic headwinds facing global energy markets.
“Short-term demand indicators are flashing warning signs,” Hynes added. “If the U.S. budget crisis drags on, oil could face additional downward pressure heading into the winter months.”
Despite the recent pullback, energy markets remain on edge amid a confluence of geopolitical and economic uncertainties, from fragile ceasefires to fragile economies.
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