Oil prices continued their downward trajectory on Tuesday as diplomatic initiatives gained momentum over the weekend, aimed at reducing tensions in the Middle East, particularly between Israel and Hamas.
Brent crude, one of the global oil benchmarks, is currently trading at $89.08 per barrel, marking a 0.31% decrease for the day.
West Texas Intermediate crude (WTI) is also on the decline, trading at $85.49 per barrel, down by 0.4% on the day.
Diplomacy eases supply
On Monday, both Brent and WTI crude experienced a more significant drop of over 2%. This drop was attributed to intensified diplomatic efforts in the Middle East, the world's largest oil-supplying region, aimed at containing the ongoing conflict between Israel and Hamas.
These efforts have somewhat eased concerns among investors about potential supply disruptions in the region.
Positive developments
In a notable development, Hamas announced on Monday that it had released two Israeli women who were among more than 200 hostages taken during its rampage in southern Israel on October 7th. Additionally, sources indicated that the U.S. had advised Israel to refrain from launching a ground assault in the Gaza Strip.
However, despite these positive signs, Israel continued its military operations in Gaza on Monday, which included airstrikes over southern Lebanon.
Market uncertainty persists
"The Israel-Hamas situation remains highly fluid, and the market remains divided over whether the conflict will continue to ease as Hamas releases hostages or potentially escalates again," noted Vandana Hari, founder of oil market analysis provider Vanda Insights.
Israel intensified its efforts on Monday by conducting numerous airstrikes in Gaza and launching ground operations against Hamas militants. This escalation has resulted in a rising death toll and worsening conditions for civilians in the beleaguered Palestinian strip.
Factors impacting oil prices
Analysts anticipate that West Texas Intermediate (WTI) crude will remain within the $80-$90 per barrel range for the foreseeable future. The global oil market is keeping a close watch on several key factors, including the situation in Israel and Gaza, OPEC production levels, and the pace of demand recovery in China. Additionally, investors are closely monitoring U.S. inventory data for further insights into the market's direction.
As diplomatic efforts continue in the Middle East, the oil market remains highly sensitive to any developments that could influence supply and demand dynamics.
