Oil prices have fallen further on Tuesday, as the market reacts to news of a possible ceasefire agreement in the Middle East. At 1344 UTC, West Texas Intermediate was down by 0.27%, to trade at $77.33 per barrel, while Brent lost by a larger margin, going for $81.44 after shedding 1.24%. Dollar-denominated crude oil was already under pressure from demand-driven fears, and looks headed downwards under current circumstances.
News broke out Wednesday, indicating progress in the ceasefire talks between Israel and Hamas. US President Joe Biden has said that he expects a deal to be in place by Monday next week. This has exerted downward pressure on oil prices. The commodity had recently received support from Israel’s announcement of preparation for a ground offensive in the densely-populated Rafah city in Gaza. Furthermore, there had been an escalation in Houthi rebels’ attacks on ships using the Red Sea.
Goldman Sachs last week estimated that the war had propped up oil prices by $2 per barrel. Therefore, traders are likely to go bearish on oil, as supply-side outlook gets more stable. Notably, there have been concerns over possible oversupply as US inventories grew significantly in two of February’s three weekly releases so far.
Furthermore, International Energy Agency projections revised downwards the demand outlook for oil from a growth of 1.24 million barrels per day to 1.22 mbpd. A rise in the next weekly US oil inventory reading could drive oil prices towards new monthly laws. However, the commodity could be kept afloat by a weak dollar. Also, China’s manufacturing PMI reading in February could provide fresh impetus on the demand side.
Technical analysis
Crude oil price has pivoted at 77.64, and the RSI on the 30-minute chart signals upside momentum. This could see the bulls take control above the pivot, and encounter the first resistance at 78.15. If the buyers continue to have a strong influence, they might face a higher resistance at 78.37. However, a shift in market sentiment could cause a drop below the pivot, leading the price to 77.22. If this level is breached, it could further decline to 76.85.
