Oil futures: Crude climbs higher on Gaza ceasefire uncertainty
Quantum Commodity Intelligence – Crude oil futures on Tuesday were climbing higher amid choppy trading conditions as investors watched for developments on US attempts to broker a ceasefire in Gaza ahead of the Ramadan holiday, in return for Israeli hostages.
Front-month Apr24 ICE Brent futures were trading at $83.46/b (1810 GMT), compared to the day's low of $82.10/b and Monday's settle of $82.53/b. The more-liquid May24 contract was trading at $82.50/b.
At the same time, Apr24 NYMEX WTI was trading at $78.66/b, versus Monday's settle of $77.58/b.
The US is pushing to secure a ceasefire/hostage deal before Ramadan starts on 10 March, following recent talks in Paris and Doha, although the US State Department said on Monday any deal now "depends on Hamas".
However, initial optimism has turned to uncertainty after Hamas officials on Tuesday played down comments made by US President Joe Biden suggesting that Hamas was close to a deal with Israel.
Last week, the US vetoed a UN Security Council resolution calling for an immediate ceasefire in Gaza. Washington has instead proposed a temporary ceasefire but also warned Israel not to invade the southern Gaza city of Rafah.
On Israel's northern border, Hezbollah fired a number of missiles Tuesday, including targeting a sensitive Israeli air traffic control base.
But markets were finding solid underlying support as attacks on shipping in the Red Sea remain a threat to oil supply lines, while OPEC+ is likely to extend current cuts.
"Prices remain well-supported due to geopolitical risks. After all, more and more oil shipments are being redirected via the Cape of Good Hope, which is causing transport costs to rise," said Carsten Fritsch of Commerzbank.
OPEC+
The German bank also said in a client note there is a growing expectation that OPEC+ will roll over current production quotas into the second quarter, which includes the additional voluntary cuts that started in January, with a decision due either later this week or early next week.
"As these production cuts officially expire at the end of March, the 'Voluntary 8' will have to agree on their future production strategy in the coming days. We assume that the producer countries will maintain the cuts for the time being," added Commerzbank.
"Otherwise there is a risk of a noticeable oversupply on the oil market, which would cause prices to slide."
RBC Capital Markets Helima Croft also said in a note: "We expect OPEC+ to announce the rollover of voluntary production quotas, at least until the June Ministerial Meeting to provide additional support."
A Bloomberg survey also backed up this view, with a strong majority of oil industry participants and analysts believing OPEC+ will extend production cuts beyond the first quarter of 2024.
Meanwhile, faster-than-expected land inventory drawdowns due to seaborne trade disruptions from the Red Sea crisis have prompted Goldman Sachs to revise upwards its summer peak forecast for Brent Crude by $2/b to $87/b.
"OECD commercial stocks on land have drawn somewhat faster than expected as the redirection of flows away from the Red Sea has increased inventories on water," said the investment bank.
