Oil Steadies After Gains, Gaza Ceasefire Talks in Focus

Oil Steadies After Gains, Gaza Ceasefire Talks in Focus
Oil rig pumpjacks, also known as thirsty birds, extract crude from the Wilmington Field oil deposits area near Long Beach, Calif., on July 30, 2013. (David McNew/Reuters)

LONDON—Oil prices held broadly steady on Tuesday as investors waited to see whether a Middle East trip by top U.S. diplomat Antony Blinken will bring a halt to the Gaza war, which has raised concerns about supplies from the major producing region.

Brent crude futures dipped 8 cents to $77.91 a barrel by 0914 GMT, while U.S. West Texas Intermediate crude futures fell 13 cents to $72.65. Both contracts gained nearly 1 percent on Monday, rising for the first time in four sessions.

“The signs of de-escalation in the Middle-Eastern crisis are missing and continue to extend some support to ailing oil prices,” said Phillip Nova senior market analyst Priyanka Sachdeva.

Mr. Blinken met Saudi Arabia’s de-facto ruler on Monday. Palestinians hope the visit will clinch a truce before a threatened Israeli assault on Rafah, a border city where about half the Gaza Strip population is sheltering.

The ceasefire offer, delivered to Hamas last week by Qatari and Egyptian mediators, awaits a reply from extremists who say they want more guarantees it will end the four-month-old war.

However, demand outlook concerns limited price gains.

Analysts said expectations of “higher for longer” interest rates in the U.S. and elsewhere could cap consumption, along with indications China’s economy continues to struggle.

CMC Markets analyst Leon Li also said it would be “difficult to return to previous highs” given that the run of strong economic indicators from the U.S. would likely lose steam.

“Layoffs are still increasing. This means that in the long term, the (oil) demand will decline,” Mr. Li said.

On the supply side, market participants are awaiting industry data due later on Tuesday on U.S. crude stockpiles. Five analysts polled by Reuters estimated on average that crude inventories rose by about 2.1 million barrels in the week to Feb. 2.

BMI analysts said in a note they expect the market will remain broadly balanced over the course of the year and oil prices would rise a moderate 3.4 percent.

“However, we see risks to the outlook both to the upside and the down, due to considerable uncertainties surrounding the strength of the global economy, the fallout from the unfolding Red Sea crisis and the evolution of OPEC+ policy, amongst other things,” they added.