(London) Oil prices fell on Wednesday, facing the geopolitical risk premium fading with hopes of a truce between Israel and Hamas and the first weekly oil statistics in the United States.
Published at 7:21 a.m.
Around 5:05 a.m., the price of a barrel of Brent from the North Sea for delivery in July fell 1.46% to $81.95.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in June, fell 1.71% to $77.04.
Both crude benchmarks are losing ground due to figures showing rising U.S. oil stocks “and growing U.S. pressure on Israel to agree to a ceasefire with Hamas,” comment DNB analysts.
Negotiations for a truce in the devastating seven-month war between Israel and Palestinian Hamas in the Gaza Strip resume Wednesday in Cairo “in the presence of all parties,” said a media outlet close to the Egyptian authorities.
Israel and Hamas “should be able to fill the gaps that remain” to conclude a ceasefire agreement currently under discussion, declared a White House spokesperson, John Kirby, saying he hoped for a agreement “very soon”.
Without the geopolitical risk premium, “the market finds itself facing an environment of persistent inflation in the United States, offset by interest rates which not only keep the American dollar high, but also make everything more expensive type of commodity trading,” notes John Evans, analyst at PVM Energy.
High rates tend to weigh on growth, and therefore on demand for crude oil, but also strengthen the dollar when it comes to the American Federal Reserve (Fed).
And since black gold prices are denominated in dollars, an appreciation of the American currency also discourages demand for oil on the markets by reducing the purchasing power of buyers using foreign currencies.
At the same time, investors are awaiting the publication of weekly data on commercial oil reserves in the United States.
The federation of professionals in the sector, the API, estimated on Tuesday that crude stocks had climbed by around 500,000 barrels for the week ended May 3.
If this figure “is confirmed later”, this “will constitute a sixth week of increase in seven weeks”, underlines Mr. Evans.
The API data is, however, considered less reliable than that of the American Energy Information Administration (EIA), which has however observed a similar trend of increasing stocks in recent weeks, and will publish its latest statistics on Wednesday weekly.
