Oil prices have fallen in mid-morning London session, as concerns over weak demand continue to cloud market outlook. WTI futures traded at $77.63 per barrel, down -0.73% at 11.15 am UTC. Brent crude followed a similar pattern, and had fallen from Monday’s closing of $83.32 to trade at $82.83 at the time of writing.
News that the United States has proposed a draft resolution on an Israel-Hamas ceasefire to be presented before the UN Security Council, has calmed nerves over supply-side pressures. The United States had been hesitant to call for a ceasefire in the four-and-a-half-month old war, but has now changed its stance. The move has reportedly been informed by concerns that Israel’s intention to move its ground troops into Gaza’s Rafah, a city of 1.5 million people, could be catastrophic.
Israel’s war cabinet minister Benny Gantz stated on Monday that the ground offensive will proceed starting March 10th unless Hamas releases all the remaining hostages. However, a ceasefire call by the United States, Israel’s biggest ally, will likely pressure Israel into rethinking its Rafah strategy.
For the oil market, delayed or lack of ground offensive in Rafah means more stable supply outlook. Furthermore, Yemen’s Houthi rebels intensified their attacks on cargo ships on the Red Sea over the weekend, and that, too, could change if the ceasefire proposal goes through. Ultimately, however, the success of the ceasefire will depend on the warring parties, Israel and Hamas. Furthermore, it will also depend on whether the terms of the ceasefire will be agreeable to them.
Meanwhile, it seems likely that oil prices will remain under pressure as the market seems inclined towards International Energy Agency’s downward-facing demand outlook. Nonetheless, other market fundamentals will come into play, especially with regards to US crude oil inventory data.
Technical analysis
Crude oil is pivoting at 77.60 on the 30-minute chart, from which there seems to be temporary stabilization. However, a move above the support through the first resistance at 78.55 could create bullish momentum. Such a momentum could lead to further upside action to test 79.00. Alternatively, the momentum could wane and bring the price under the 77.60 level. Continued control by the sellers could bring the price lower to 77.25, beyond which the next support will likely come at 76.80.
WTI price on a 30-minute chart