Oil futures: Crude slides as Israel-Hezbollah ceasefire moves closer

Quantum Commodity Intelligence - Crude oil futures Monday were in retreat amid reports that a ceasefire deal between Israel and Hezbollah was gaining traction.

Front-month Jan25 ICE Brent futures were trading at $73.05/b (1900 GMT), compared to Friday's settle of $75.17/b and the intraday high of $75.38/b.

At the same time Jan25 NYMEX WTI was trading at $68.92/b, versus Friday's close of $71.24/b.

According to CNN, Israeli Prime Minister Benjamin Netanyahu has approved the proposed ceasefire deal with Hezbollah "in principle" during a security consultation with Israeli officials Sunday night.

The report added that details of the agreement were expected to be transmitted with the Lebanese government on Monday, although CNN sources stressed that the agreement will not be final until all issues are resolved.

The Times of Israel later reported that the national security cabinet will meet to discuss a ceasefire with Lebanon at the IDF Kirya headquarters in Tel Aviv on Tuesday at 5:30 p.m.

Prices had been moving sideways earlier in the session as broader demand concerns largely offset geopolitical tensions.

Gains

Oil benchmarks had gained around 6% over the past week, underpinned by spiralling events in the Russia-Ukraine conflict, although so far energy exports have not been disrupted by recent events.

Tensions ramped up last week after Russian President Vladimir Putin signed an amendment to the country's nuclear doctrine, widening the scope for Moscow to use the weapons.

"This escalation has raised geopolitical tensions beyond levels seen during the year-long conflict between Israel and Iran-backed militants," said Ole S Hansen, Head of Commodity Strategy at Saxo Group, noting the broader commodities complex posted the highest weekly gains since April.

Meanwhile, the threat of tighter sanctions against Iranian oil ratcheted up after the collapse of a deal that would limit Iran's stockpiles of enriched uranium.

Additionally, markets were given a leg-up by improved refining margins and soaring natural gas prices, with the US and Europe hit by early-winter cold snaps.

However, broader fundaments continued to work against oil amid a backdrop of lacklustre demand growth from China and Europe, while non-OPEC+ production continues to increase.