Oil Prices Decline Amid Ceasefire News

By Erwin Seba
Houston (Reuters) – Oil prices slid on Tuesday, settling down more than 4% on news of a possible ceasefire between Hezbollah and Israel. However, prices found some support due to fears of a potential attack on Iranian oil infrastructure.

Brent crude futures settled down $3.75, or 4.63%, at $77.18 a barrel. U.S. West Texas Intermediate futures finished down $3.57, or 4.63%, at $73.57 a barrel. At their session lows, both were down more than $4 a barrel.

"We continue to be very headline dependent," said John Kilduff, partner with Again Capital LLC. "This morning, we heard about the potential ceasefire. Then we got indications targets are still being dialed in and energy targets are in the mix."

"That Hezbollah is open to a ceasefire is the kind of headline that people jump on," stated Phil Flynn, senior analyst at Price Futures Group. "There should be a lot of volatility up and down on this conflict."

On Monday, Brent rose above $80 per barrel for the first time since August after a more than 3% daily gain. This followed the largest weekly gain in over a year, roughly 8%, in the week to Friday due to concerns of a spreading war in the Middle East.

Hezbollah indicated a possible negotiated ceasefire after Israeli forces intensified their operations against the Iran-backed group with new incursions into southern Lebanon.

Israeli defense minister Yoav Gallant reported that it seemed the replacement for slain Hezbollah leader Sayyed Hassan Nasrallah had also been eliminated.

Late on Tuesday, Israel's military warned people away from specific buildings in the southern suburbs of Beirut.

The oil price rally began after Iran launched a missile barrage at Israel on October 1. Israel has vowed to retaliate and is weighing its options.

Some analysts argued that an attack on Iranian oil infrastructure is unlikely, warning that oil prices could face considerable downward pressure if Israel focuses on other targets.

In the U.S., Hurricane Milton intensified into a Category 5 storm heading towards Florida, forcing at least one oil and gas platform in the Gulf of Mexico to shut down on Monday.

U.S. crude oil stocks rose by nearly 11 million barrels last week, while fuel stockpiles fell, according to market sources citing American Petroleum Institute figures on Tuesday.

Crude stocks increased by 10.96 million barrels in the week ended October 4, while gasoline inventories decreased by 557,000 barrels and distillate stocks fell by 2.60 million barrels.