Oil prices declined on Friday due to the potential for a ceasefire in Gaza, which could alleviate geopolitical tensions in the Middle East. Additionally, the stronger U.S. dollar and weakening demand for gasoline in the United States contributed to the downward pressure on prices.
Read more: Oil prices surge on weaker dollar, Fed’s policy announcement
As of 02:03 GMT, Brent crude futures dropped by 42 cents, or 0.5 percent, to $85.36 per barrel, while U.S. crude futures fell by 40 cents, or 0.5 percent, to $80.67 per barrel. Despite last week’s increase of over 3 percent, both contracts were on track to end the week with minimal changes.
According to IG analyst Tony Sycamore, oil prices were negatively influenced by reports of a United Nations draft resolution calling for a ceasefire in Gaza, as well as profit-taking activities. U.S. Secretary of State Antony Blinken expressed confidence on Thursday that discussions in Qatar could lead to an agreement for a Gaza ceasefire between Israel and Hamas, thereby reducing geopolitical risks in the region. Blinken held meetings with Arab foreign ministers and Egypt’s President Abdel Fattah El-Sisi in Cairo, while negotiators in Qatar focused on a proposed truce lasting approximately six weeks.
Crude demand slowdown
In the United States, the world’s largest oil consumer, the supply of gasoline products, which serves as a proxy for demand, dropped below 9 million barrels for the first time in three weeks, indicating a potential slowdown in crude oil demand. However, consultancy firm FGE suggested that preliminary weekly data for the first half of March, which revealed a decline of nearly 12 million barrels in on-land crude and primary product stocks at major oil hubs worldwide, compared to the average draw of 6 million barrels from 2015 to 2019, could have a bullish effect on oil prices.
Meanwhile, the U.S. dollar, which has an inverse relationship with oil prices, strengthened following the surprise interest rate cut by the Swiss National Bank, which boosted global risk sentiment. A stronger dollar makes oil more costly for investors holding other currencies, thereby reducing demand.
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