London: Global oil markets edged lower on Friday, as the fading risk premium following the Gaza ceasefire between Israel and Hamas tempered previous concerns about supply disruptions. Brent crude futures fell $1.73 (2.7%) to $63.49 a barrel, marking the lowest level since early June, while U.S. West Texas Intermediate (WTI) crude dipped $1.71 (2.8%) to $59.80, reaching lows not seen since May.
The recent Gaza ceasefire, which includes a partial Israeli withdrawal and the release of hostages held by Hamas, helped ease fears over the security of critical shipping lanes in the region, particularly the Suez Canal and the Red Sea. Analysts noted that these corridors are vital for the transport of crude and petroleum products, and any disruption previously heightened the risk premium in global oil markets. Bjarne Schieldrop, chief commodities analyst at SEB, remarked, “Finally having some kind of peace process in the Middle East is lowering the shoulders a little bit,” reflecting the market’s relief.
With geopolitical risks receding, market attention has shifted back to supply and demand fundamentals. OPEC+ has been gradually unwinding its production cuts, raising concerns about potential oversupply. Daniel Hynes of ANZ highlighted that the market is increasingly focused on the possibility of a global oil surplus, which could place downward pressure on prices despite current stability.
Beyond supply-side considerations, investors are closely monitoring developments in the United States, where a potential government shutdown could slow economic activity and reduce crude demand in the world’s largest oil-consuming nation. Combined with fluctuating demand expectations and uncertainties surrounding global economic growth, these factors add complexity to the short-term oil price outlook.
Looking ahead, oil prices are likely to remain sensitive to geopolitical developments, OPEC+ production decisions, and economic indicators in key consuming nations. While the Gaza ceasefire has temporarily eased Middle East risk premiums, ongoing concerns about oversupply and potential demand shocks could influence price trends in the coming weeks.
The energy market now faces a delicate balance: geopolitical tensions are easing, yet underlying supply and demand factors continue to weigh on investor sentiment, creating a cautious outlook for crude futures in the near term.