Oil prices settled lower for a second day on Tuesday, as talks for a ceasefire in Gaza continued, but losses were limited to less than a dollar a barrel as Egyptian and Qatari mediators met resistance in their search to find a way out of the war.
The talks in Cairo, also attended by the director of the U.S. Central Intelligence Agency, William Burns, have so far failed to reach a breakthrough.
Hamas said an Israeli proposal on a ceasefire met none of the demands of Palestinian militant factions, but that it would study the offer further and deliver its response to mediators.
Brent crude futures settled 96 cents, or 1.1%, lower at $89.42 per barrel, while U.S. West Texas Intermediate (WTI) crude futures closed down $1.20 or 1.4% at $85.23.
On Monday, Brent posted its first decline in five sessions and WTI its first in seven as a fresh round of Israel-Hamas ceasefire discussions in Cairo raised hopes of a breakthrough.
“Without an end to the conflict, there is an elevated risk that other countries, particularly Iran, OPEC’s third-largest producer, could be drawn into the war,” said Fiona Cincotta, senior financial market analyst at City Index.
The commander of the Revolutionary Guard’s navy in Iran said it could close the Strait of Hormuz if deemed necessary. About a fifth of the volume of the world’s total oil consumption passes through the strait daily.
Turkey announced it would restrict exports of various products, including jet fuel, to Israel until there is a ceasefire. Israel said it would respond with its own curbs.
Adding to concerns of a tight market, Mexico’s state oil company, Pemex, said it would reduce crude exports by 330,000 barrels per day (bpd) in May so it can supply more to domestic refineries, cutting by a third the supply available to its U.S., European and Asian buyers. Pemex had already cut its April exports by 436,000 bpd.
Limiting oil price declines, overall fundamentals of tighter supplies remain unchanged, said Dennis Kissler, senior vice president of trading at BOK Financial, citing OPEC’s supply cuts, reduction of fuel exports by Russia and geopolitical instability.
U.S. crude oil output was expected to rise by 280,000 bpd to 13.21 million bpd in 2024, versus a prior forecast for a 260,000 bpd increase, the U.S. Energy Information Administration (EIA) said.
EIA said it expects Brent crude prices to average $88.55 a barrel in 2024, versus a previous forecast of $87 a barrel.
Vitol CEO Russell Hardy told a conference in Switzerland that he expected oil prices to trade in a range on $80-100 a barrel and expected oil demand growth of 1.9 million bpd in 2024.
U.S. crude inventories were expected to have risen by about 2.4 million barrels in the last week.