Oil prices rise amid fading hopes for a ceasefire in the Middle East

Oil prices rose in early Asian trading after hopes diminished that talks between Israel and Hamas would lead to a ceasefire in Gaza and ease tensions in the Middle East.

 

Brent crude futures rose 40 cents to $90.78 a barrel by 0032 GMT. U.S. West Texas Intermediate (WTI) crude rose 35 cents to $86.78.

 

A new round of ceasefire talks between Israel and Hamas in Cairo ended a multi-season rally on Monday, sending Brent crude down for the first time in five sessions and WTI crude down for the first time in seven, amid the prospect of weakening geopolitical risks.

 

But then Israeli Prime Minister Benjamin Netanyahu said Monday that an unspecified date had been set for an Israeli invasion of the Rafah enclave in Gaza, "ending the short-term hopes that gripped the market yesterday that geopolitical tensions in the region might be easing," Tony Sycamore, a market analyst at IG, wrote in a note.

 

Hamas rejected Israel's latest cease-fire offer made at talks in Cairo, a senior Hamas official said Monday.

 

The market continues to weigh the risk of oil supply disruptions. Iran's response to Israel's alleged attack on its consulate in Syria "could drag the oil market into a conflict that has barely touched it since the Hamas attack on Israel," ANZ analysts said in a client note.

 

Tehran said last week it would retaliate after an airstrike that killed two of its generals and five military advisers in Damascus, although Israel did not claim responsibility for the attack.

 

Meanwhile, broader fundamentals are supporting prices. Fuel demand in India hit a record high in the 2024 financial year thanks to a rise in gasoline and jet fuel consumption, data showed on Monday. Improved manufacturing activity in China, announced last week, is expected to boost fuel demand.

 

The market will be watching inflation data due from the U.S. and China this week for further signals on the direction of the economies of the world's two biggest oil consumers.

 

In the Americas, Mexico's state-owned oil company Pemex said it would cut crude exports by 330,000 barrels a day to be able to supply more oil to domestic refineries, reducing by a third the amount of supply available to the company's customers in the U.S., Europe and Asia.