Oil heads for weekly gains after Israel rejects ceasefire offer

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Oil prices were little changed on Friday, staying on track for weekly gains, with tensions persisting in the Middle East after Israel rejected a ceasefire offer.

Brent crude futures slipped 1 cent to $81.62 a barrel by 0334 GMT, while US West Texas Intermediate crude futures rose 3 cents to $76.25 a barrel.

Israeli actions impact oil prices

Both benchmarks rose about 3 per cent in the previous session as Israeli forces targeted the southern border city of Rafah on Thursday after Prime Minister Benjamin Netanyahu rejected a proposal to end the crisis.

The tensions have kept oil prices elevated, with Brent and WTI both set to gain more than 5 per cent for the week.

“The move yesterday seemed a bit excessive on the back of not very much at least in terms of fundamentals,” ING’s head of commodities research Warren Patterson said.

“I still expect the rangebound trading that we have become accustomed to recently will continue given the comfortable oil balance.”

US officials made their most pointed criticism so far of Israel’s civilian casualties in Gaza as it turned the focus of its offensive to Rafah.

A Hamas delegation arrived in Cairo on Thursday for ceasefire talks with mediators Egypt and Qatar.

Oil production unchanged

While the conflict has propped up prices, there has been no impact on crude production.

Non-OPEC output from Norway and Guyana is increasing while Russia is exporting more crude in February than it planned following a combination of drone attacks and technical outages at its refineries that could undermine its pledge to curb sales under an OPEC+ pact.

Under the deal with the Organization of the Petroleum Exporting Countries and allies, called OPEC+, Russia committed to capping crude output at 9.5 million barrels per day (bpd). It is also voluntarily cutting crude exports by 300,000 bpd and fuel exports by 200,000 bpd from the average May-June level.

Deflation risks in China, the world’s top crude oil importer, are also weighing on global oil prices, IG analyst Tony Sycamore said.

“I think the lower crude oil price in Asia is largely due to early weakness in China’s equity markets and the fallout from yesterday’s shocking CPI figure in China which has served to further undermine confidence ahead of the Lunar New Year celebrations,” he added.

Read: OPEC oil output sees biggest monthly fall in January: Trend watch