By Georgina McCartney
HOUSTON (Reuters) -Oil prices edged down on Friday as the increasing prospect of a Gaza ceasefire outweighed strong summer fuel demand and potential Gulf of Mexico hurricane supply disruptions.
Brent crude futures were down 41 cents, or 0.47%, to $87.02 a barrel by 01:24 p.m. EDT, after reaching their highest since April earlier in the session. U.S. West Texas Intermediate (WTI) crude futures fell 26 cents, or 0.31%, at $83.62.
Efforts to secure a ceasefire and hostage release in Gaza gathered momentum on Friday after Hamas made a revised proposal on the terms of a deal and Israel said it would resume stalled negotiations.
“Obviously a break through there would help calm the waters”, said John Kilduff, partner at Again Capital. An easing of the Middle Eastern conflict reduces the risk premium of barrels out of the region and weighs on oil prices.
WTI did not settle on Thursday due to the Independence Day holiday, giving way to thin trading, but prices have risen this week on strong summer oil demand expectations in the United States.
“The last couple of days represent the peak of the drive season, in terms of demand and prices continue to creep higher. This is coming from stronger consumer demand and the effects of Hurricane Beryl,” Tim Snyder, economist at Matador economics said in a note on Friday.
The U.S. Energy Information Administration (EIA), on Wednesday, reported a much larger-than-expected 12.2 million barrel inventories draw last week, compared with analyst expectations for a draw of 700,000 barrels. [EIA/S]
On the supply side, Hurricane Beryl, a Category 2 storm, made landfall in Mexico, after killing least 11 people in the Caribbean, tearing through buildings and power lines across several Caribbean islands.
Mexico’s major oil platforms are not expected to be affected by the storm, but oil projects in U.S. waters to the north may be disrupted if the hurricane continues on its expected path.
The possibility that U.S. interest rate cuts are approaching, meanwhile, raised expectations for an increase in oil demand.
U.S. job growth slowed marginally in June, but a rise in the unemployment rate to more than a 2-1/2 year high of 4.1% and moderation in wage gains pointed to an easing of labor market conditions that keeps the Federal Reserve on track to start cutting interest rates this year, with some analysts betting on an earlier cut.
“This morning’s employment data shows that there are some cracks in the labor market, that could spur on a rate cut even this month”, said Kilduff at Again Capital.
Lower interest rates can boost economic activity and increase crude oil demand.
(Reporting by Georgina McCartney in Houston, Arunima Kumar in Bengaluru and Ahmad Ghaddar in London, additional reporting by Sudarshan Varadhan in SingaporeEditing by David Goodman, Jane Merriman and David Evans)
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