Oil settles at one-month low; sheds over $2 led by firm US dollar, Gaza ceasefire hopes: Brent down 2% to $82/bbl

International crude oil prices settled over $2 lower in the previous session at their lowest level since mid-June as investors eyed a possible ceasefire in the Middle East's Gaza. A strengthened US dollar also drove values down further.

Brent crude prices settled down $2.48, or 2.9 per cent, to $82.63 a barrel. US West Texas Intermediate crude futures dropped $2.69, or 3.3 per cent, to $80.13. Regarding domestic prices, crude oil futures last traded 3.46 per cent lower at ₹6,609 per barrel on the multi-commodity exchange (MCX).

Also Read: ONGC, Oil India share price: Analysts positive as Brent crude price sustains above $80 level, likely to remain firm

What's weighing on crude oil prices?

-US Secretary of State Antony Blinken said a long-sought ceasefire between Israel and the Palestinian militant group Hamas was within sight. "I believe we're inside the 10-yard line and driving toward the goal line in getting an agreement that would produce a ceasefire, get the hostages home and put us on a better track to trying to build lasting peace and stability," said Blinken.

-The war in Gaza has led investors to price in a risk premium when trading oil, as tensions threaten global supplies. If a ceasefire is reached, the Iran-backed Houthi rebels could ease their attacks on commercial vessels in the Red Sea, since the group declared the attacks in support of Hamas.

-The United Nations' highest court said Israel's occupation of Palestinian territories and its settlements there are illegal and should be withdrawn as soon as possible, further buoying hopes of an end to the conflict.

Also Read: US inflation cools for third straight month at 0.1% in June; Wall Street lifts Fed rate cut bets for September

-The US dollar index climbed after stronger-than-expected data on the US labor market and manufacturing this week, pressuring oil prices. A stronger US currency dampens demand for dollar-denominated oil from buyers holding other currencies.

=Chinese officials acknowledged the sweeping list of economic goals reemphasized at the end of a Communist Party meeting contained "many complex contradictions", pointing to a bumpy road for policy implementation.

-China's economy grew by a slower-than-expected 4.7 per cent in the second quarter, sparking concerns over its demand for oil. Lending some support to prices, energy services firm Baker Hughes said oil rigs fell by one to 477 this week, their lowest since December 2021.

-A global tech outage disrupted operations in multiple industries, with airlines halting flights, some broadcasters going off air and sectors from banking to healthcare hit by system problems. Meanwhile, two large oil tankers were on fire after colliding near Singapore.

-Singapore is Asia's biggest oil trading hub and the world's largest bunkering port. Its surrounding waters are vital trade waterways between Asia, Europe, and the Middle East and are among the busiest global sea lanes.

Also Read: Israel’s undercover forces emerge as Gaza’s newest battlefield player

Where are prices headed?

According to Kaynat Chainwala, AVP-Commodity Research, Kotak Securities, WTI crude oil prices surged to $82.80 per barrel, buoyed by the third consecutive week of inventory declines and increasing optimism about an earlier Fed pivot. Over the past three weeks, US crude oil inventories have dropped by more than 20 million barrels, as the EIA Weekly Petroleum Status Report reported. 

Additionally, Bloomberg reported that OPEC+ delegates anticipate the group's upcoming monitoring session next month to be routine, with no changes expected to plans for increasing supply starting in the fourth quarter.  The uncertainty surrounding initiatives aimed at addressing structural issues in China's economy during the recent key political meeting could further weigh on demand following an 11 per cent decline in oil imports in June.

‘’Oil prices are buoyed by the anticipation of possible Fed rate cuts in the September policy meetings. However, gains in crude oil were limited by a rebound in the dollar index and the IMF board's recommendation for the US to maintain higher interest rates by the end of this year. We expect crude oil prices to remain volatile. Crude oil has support at $79.80-79.10 and resistance at $81.10-81.70. In INR, crude oil has support at ₹6,920-6,860 and resistance at ₹7,060-7,115,'' said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.