Oil prices turn higher as Middle East ceasefire hopes wane

Oil prices edged higher on Tuesday, after hopes diminished that negotiations between Israel and Hamas would lead to a ceasefire in Gaza, and on Mexico‘s plan to remove more crude from the global market.

Brent crude futures rose 28 cents, or 0.31%, to US$90.66 a barrel by 1002 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 24 cents or 0.28% at US$86.67.

On Monday a fresh round of Israel-Hamas ceasefire discussions in Cairo had ended a multi-session rally, leading Brent to its first decline in five sessions and WTI to its first in seven on prospects for a breakthrough.

However, Israeli prime minister Benjamin Netanyahu saying on Monday that a date had been set for Israel’s invasion of the Rafah enclave in Gaza ended hopes that tensions in the region might be easing, said IG analyst Tony Sycamore in a note.

The continuation of the conflict keeps alive the risk that other countries could be drawn in, especially Iran which is a major Hamas backer and the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).

Adding to concerns of a tight market, Mexico’s state oil company Pemex said it would reduce crude exports by 330,000 barrels per day so it can supply more to domestic refineries, cutting the supply available to the company’s U.S., European and Asian buyers by one-third.

Pemex had already cut its April exports by 436,000 bpd.

Investors are also awaiting inflation data due from the U.S. and China for further signals on the economic direction of the world’s top two oil consumers, as well as an interest rate decision from the European Central Bank on Thursday.

“The fate of interest rates and if there can be a reduction in 2024 is at stake and the rally in oil is making it harder for anyone believing that inflation is under control,” said PVM analyst John Evans.

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