Oil prices rise as Gaza ceasefire hopes dim, supply outlook tightens

© Reuters.

Investing.com– Oil prices rose in Asian trade on Monday amid easing expectations that an Israel-Hamas ceasefire was imminent, while signs of smaller inventories and fuel supply disruptions presented a tighter outlook for crude markets. 

Crude prices had fallen from four-month highs last week amid increasing speculation over a Gaza ceasefire for the Muslim holy month of Ramadan. But a U.S.-led United Nations resolution was vetoed by Russia and China on Friday. 

A stronger dollar had also weighed on oil. But losses in crude were held back by expectations of tighter supplies in 2024, while strength in the U.S. economy also presented a positive outlook for demand. 

Brent oil futures expiring in May rose 0.5% to $85.90 a barrel, while West Texas Intermediate crude futures rose 0.6% to $81.11 a barrel by 21:20 ET (01:20 GMT). 

United Nations to vote on alternative ceasefire resolution 

The United Nations Security Council will later on Monday vote on an alternative resolution for an immediate ceasefire in the Gaza strip for Ramadan, as well as the release of all hostages by Hamas. 

The resolution was tabled almost immediately after China and Russia vetoed a U.S.-led resolution, which had come amid increasing calls from U.S. officials for Israel to temper its strikes on Gaza and Palestine. 

A deescalation in the Israel-Hamas conflict is expected to soothe concerns over geopolitical instability in the Middle East- which could potentially disrupt crude supplies from the region. This notion has been a key support of oil prices in recent months.

Oil supply outlook remains tight 

On the supply front, reduced Russian fuel output, following Ukrainian strikes on major refineries, pointed to lower oil product supplies in the coming months. The Russia-Ukraine war also showed no signs of de escalation. 

U.S. inventories were seen steadily shrinking in recent weeks, with steady drawdowns in fuel inventories also reflecting improved demand in the world’s largest oil consumer. 

U.S. oil rigs fell by one in the past week, indicating weaker production, while increased travel demand also saw jet fuel consumption increase.

The prospect of tighter supplies put oil prices at four-month highs earlier in March, and also saw crude prices trade positive for the year to date.