Oil futures: Crude moves sideways amid Gaza ceasefire uncertainty

Quantum Commodity Intelligence – Crude oil futures Tuesday were little changed, with investors waiting for further news on events surrounding the Gaza conflict as focus pivots back to geopolitics.

Front-month Jul24 ICE Brent futures were trading at $83.25/b (1900 GMT), compared to the day's range of $82.41-$83.88/b and Monday's settle of $83.33/b.

At the same time Jun24 NYMEX WTI was trading at $78.50/b versus Monday's settle of $78.48/b.

Prices initially opened the week higher on fading hopes for a ceasefire, but the gains were slowly eroded through Monday amid reports that Hamas had accepted proposals.

But the situation remained fluid, with Israel saying that the deal did not meet its "core demands" and it would push ahead with plans for military operations in the southern city of Rafah.  

According to the Associated Press, the Israeli military said it was conducting "targeted strikes" against Hamas in eastern Rafah early Tuesday, with Israeli tanks entering the city shortly after.

Meanwhile, the US said it was reviewing the response from Hamas with regard to terms of a ceasefire and hostage release deal but declined to give details.

Outlook

Oil markets also faced uncertainty on the demand outlook and macroeconomic situation, weighing on sentiment.

"The weakness in some fuel markets, which includes China, and growing concerns the Federal Reserve may not deliver a demand boosting rate cut anytime soon as inflation remains sticky, together with an almost removal of the geo-political risk premium have all led to long liquidation from hedge  funds, and they hold the key to how low the market may fall before support is reestablished," said Ole S Hansen, Head of Commodity Strategy at Saxo Group.

However, analysts said that the price retreat since mid-April means that OPEC+ is less likely to start unwinding cuts in the third quarter, with ministers set to meet on 1 June, as the group's discipline is under scrutiny.

OPEC has published plans for Iraq and Kazakhstan to compensate for overproduction during the first quarter when the two countries pumped a combined volume of around 330,000 bpd above the agreed ceiling during the period.

OPEC's board of governors was meeting in Vienna Tuesday, but was expected to focus on operational matters rather than discuss policy.