Oil prices dipped from a five-month high after reports emerged that Israel and Hamas have tentatively agreed to a ceasefire, easing concerns about supply disruptions. West Texas Intermediate (WTI) dropped by 1.7%, settling at $77.50 a barrel, after CBS revealed that both parties reached a draft deal that includes a ceasefire and a hostage release. The deal could signal an end to the ongoing conflict that has impacted global oil markets for over 15 months.
The relative strength index indicated that crude futures had been overbought since the beginning of the year, suggesting a pullback in oil prices was imminent. Daniel Ghali, a commodity strategist at TD Securities, mentioned that algorithmic investors, known as commodity trading advisers (CTAs), were showing signs of buying fatigue. Ghali stated that future price projections no longer indicate increased CTA investment in WTI crude, implying that further price support would need to come from supply risks, such as sanctions on Russia.
This comes after the US imposed its most stringent sanctions on Russia’s oil industry, targeting 160 tankers involved in Russian oil trades. The US benchmark rose 6.6% over the previous two sessions, while shipping rates for oil surged on the back of Washington’s new measures. While the impact of these sanctions on oil prices remains uncertain, it could prompt a global rerouting of oil flows, especially for refiners in India and China who rely heavily on Russian supplies.
Despite some signs of potential disruption, including India’s decision to block sanctioned vessels from discharging oil, analysts suggest Russia may find ways to maintain its supply. Oil prices have tempered concerns, with traders pausing to assess the situation before continuing the rally, according to Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Meanwhile, in the US, Alberta Premier Danielle Smith warned that President-elect Trump’s tariffs would not include exemptions for Canadian oil, which makes up over half of US crude imports. The implications of these tariffs on oil prices are significant. Most of this oil comes from Alberta, making it a significant issue in US-Canada trade relations.
