U.S. Crude Oil Prices Drop Amid Geopolitical Tensions and Sluggish Demand

Lamseen – U.S. crude oil prices fell to $74 per barrel following a sell-off during the previous session, amid concerns about demand in Asia and ongoing ceasefire discussions in the Middle East. According to CNBC on Wednesday (August 21, 2024), West Texas Intermediate (WTI) crude oil for September delivery was priced at $74.04 per barrel, a decrease of 33 cents or 0.44%. For the year, U.S. crude oil prices have increased by 3.2%. In contrast, Brent crude for October delivery was priced at $77.20 per barrel, down 46 cents or 0.59%. Year-to-date, this global benchmark has seen a modest rise of just 0.2%.

Francisco Blanch, Bank of America’s Commodity Strategist, commented, “We are witnessing a reversal in oil prices due to significantly higher supply coupled with weaker demand.” He added, “Oil prices are essentially driven by supply and demand fundamentals. Currently, we are facing some headwinds due to China’s economic slowdown.”

U.S. and Brent Crude Oil Prices

Both U.S. and Brent crude oil prices have decreased by 9.2% so far this quarter. U.S. Secretary of State Antony Blinken is currently in the Middle East, working diligently to broker a ceasefire agreement in Gaza and secure the release of hostages held by Hamas. Blinken reported that Israeli Prime Minister Benjamin Netanyahu has accepted the mediator’s proposal and has urged Hamas to do the same.

However, Hamas leader Yahya Sinwar views the latest ceasefire negotiations as a ploy to give Israel additional time to advance its military actions in Gaza, according to Arab mediators speaking to The Wall Street Journal. Sinwar hopes to exert pressure on Israel by launching attacks from the West Bank, as per the Journal’s sources.

The decline in oil prices has been influence by Iran’s restraint from retaliating against Israel following the killing of a Hamas leader in Tehran in late July. The U.S. hopes that a ceasefire agreement in Gaza will prevent a broader conflict in the region. “The market has, to some extent, mistakenly assumed that these geopolitical risks have dissipated.” Said Amena Bakr, Senior Researcher at Energy Intel.

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Impact of U.S. Push for Ceasefire on Crude Oil Prices

U.S. crude oil futures fell nearly 3% at Monday’s close, with prices dipping below $75 per barrel. The drop in U.S. crude oil prices is attribute to the U.S. push for a ceasefire to end the Gaza conflict. Along with concerns about weakening demand affecting the crude oil market.

U.S. Secretary of State Antony Blinken is in Israel, warning that this might be the last chance to secure a deal that ends the fighting and frees the hostages held by Hamas. Ceasefire talks are set to continue this week in Cairo, Egypt. As reported by CNBC on Tuesday (August 20, 2024), here are the closing energy prices for Monday:

• West Texas Intermediate crude oil for September delivery closed at $74.37 per barrel, down $2.28 or 2.97%. Year-to-date, U.S. oil prices have risen by 3.8%.
• Brent crude for October delivery closed at $77.66 per barrel, down $2.02 or 2.54%. Since the beginning of the year, this global benchmark has increased by 0.8%.
• Gasoline for September delivery closed at $2.26 per gallon, down more than 4 cents or 2%. Year-to-date, gasoline prices have risen by 7.7%.
• Natural gas for September delivery closed at $2.23 per thousand cubic feet, up 11 cents or 5.3%. Year-to-date, natural gas prices have decreased by 11.1%.

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