Investing.com– Oil prices settled lower Monday after Israel withdrew soldiers from parts of Gaza and committed to renewed dialogue over a potential ceasefire with Hamas, easing Middle East tensions that have threaten to disrupt oil supplies in the region.
At 14:30 ET (18:30 GMT). fell 0.6% to settle at $86.43 a barrel Israel, and expiring in June fell 0.7% to $90.53 a barrel.
Rising hopes of ceasefire talks in Egypt cools Middle East tensions
Teams from Israel and Hamas met in Egypt for renewed ceasefire talks, with the dialogue coming just days before the Eid holidays this week.
Israel also pulled out troops from Southern Gaza, including Khan Younis. But the country still maintained its forces in other parts of the disputed region.
The moves- particularly the ceasefire talks- presented some potential for a greater de-escalation in the conflict, especially as the U.S. urged Israel to tone down its offensive against Gaza over human rights violations.
Still, there appears to be uncertainty about the progress made so far on ceasefire talks as an Hamas official told Reuters that no progress had been made yet.
A senior Egyptian source, however, told Al-Qahera News TV that progress had been made, while spokesman for Qatar’s Ministry of Foreign Affairs Majed Mohammed al-Ansari told the BBC Qatar was growing “more optimistic” of a deal than it has been in recent days.
But a de-escalation in the Israel-Hamas war potentially puts to rest a key point of support for oil markets- specifically that crude supplies from the Middle East will be disrupted by the conflict.
Tight oil supply expectations remain in play
Expectations of tighter oil supplies had also boosted crude prices in recent weeks, and continued to remain in play.
The Organization of Petroleum Exporting Countries and allies (OPEC+) recently reiterated that its production cuts will remain in place until end-June, while top producer Russia also flagged deeper production cuts.
Russian fuel production was also disrupted by Ukrainian strikes on the country’s oil infrastructure, which put several key refineries out of commission.
“The prospect of a tighter market during the second quarter should support prices in coming months,” ANZ Research said in a note.
On the demand front, positive economic data from top oil importer China also ramped up optimism, while shrinking U.S. gasoline inventories presented strong demand in the world’s largest fuel consumer.
(Ambar Warrick contributed to this story.)