By Adedapo Adesanya
The oil market slowed down by more than 4 per cent on Tuesday following news of a possible ceasefire between Hezbollah and Israel.
This shrank the price of Brent crude by $3.75 or 4.63 per cent to $77.18 a barrel and weakened the US West Texas Intermediate (WTI) crude by $3.57 or 4.63 per cent to $73.57 per barrel.
On Monday, Brent rose above $80 per barrel for the first time since August after more than a 3 per cent daily gain. This was after it recorded the largest weekly gain in over a year gaining 7 per cent in the last week.
The oil price rally began after Iran launched a missile barrage at Israel on October 1. Israel has sworn to retaliate and said it was weighing its options.
However, these gains were tampered with after Reuters reported that Hezbollah left the door open to a negotiated ceasefire.
This was after Israeli forces raised the stakes in the conflict with its Iran-backed enemy by making new incursions in the south of Lebanon.
Also, traders have yet to see an actual supply disruption in the Middle East.
Analysts also said an attack on Iranian oil infrastructure was unlikely and warned oil prices could face considerable downward pressure if Israel focuses on any other target.
Western powers are actively seeking a diplomatic solution, fearing the conflict could affect the wider, oil-producing Middle East.
The return of Libya’s oil production and exports after more than a month of hiatus due to the political stalemate has also weighed on the prices. Its crude oil and condensates have reached 1,133,133 barrels per day, according to the National Oil Corporation (NOC) said on Tuesday.
Meanwhile, support could come as Hurricane Milton intensified into a Category 5 storm in the US on its way to Florida after forcing at least one oil and gas platform in the Gulf of Mexico to shut on Monday.
According to the American Petroleum Institute (API), crude oil inventories in the US rose by a shocking 10.9 million barrels for the week ending October 4. For the week prior, the API reported a 1.5-million-barrel decrease in crude inventories.
So far this year, crude oil inventories have slumped by just 5 million barrels since the beginning of the year, according to API data.
Official data from the US Energy Information Administration (EIA) will be released later on Wednesday.