Oil prices declined on Thursday as news of an Israel Hamas ceasefire agreement stripped away the geopolitical risk premium that had been supporting crude markets, with Brent futures trading around $66 per barrel and West Texas Intermediate falling below $62.
President Donald Trump announced that Israel and Hamas had agreed to the first phase of a peace plan, including the release of hostages held in Gaza, marking what negotiators described as a major breakthrough in U.S. and Qatari mediated talks aimed at ending the two year conflict. Israeli Prime Minister Benjamin Netanyahu said he would convene the government to approve the ceasefire deal, while Trump indicated he may visit Israel soon.
The market’s reaction was swift but measured. Experts believe the peace agreement will result in the reduction of one to two percent of the current oil price, reflecting the removal of what traders call the “war premium” that had been built into crude valuations during months of Middle Eastern tensions.
But here’s what makes this price movement particularly interesting: it’s happening against a backdrop of surprisingly strong U.S. demand and tightening inventories. At 420.3 million barrels, U.S. crude oil inventories are about four percent below the five year average for this time of year, suggesting the market isn’t exactly awash in surplus supply despite the geopolitical easing.
Crude stocks increased by 3.72 million barrels in the week ending October 3, marking the second consecutive weekly build. Yet those numbers don’t tell the full story. Stockpiles at the Cushing hub, the critical delivery point for WTI futures, actually declined during the same period, while refined product inventories also dropped.
What’s supporting prices from falling further is demand. Total petroleum products supplied, which the Energy Information Administration uses as a proxy for consumption, reached 21.99 million barrels per day, the highest level since December 2022. That’s not the kind of demand picture you’d expect if the economy were slowing significantly.
Global oil demand averaged 105.9 million barrels per day in the first seven days of October, expanding by 300,000 barrels per day from last year’s level, according to analysts, though it came in slightly below some forecasts. The pace of global crude and products inventory build has also slowed, suggesting consumption is keeping up reasonably well with production.
Market participants said Thursday’s modest movement reflected a balance between easing geopolitical risk, which removed upward price pressure, and strong U.S. demand supporting crude. It’s a tug of war that’s likely to continue as traders weigh whether the ceasefire will hold and what it means for Middle Eastern supply security.
The ceasefire’s impact on oil markets highlights something that sometimes gets lost in daily price movements: geopolitical tensions often matter more for what they might become than what they currently are. The Israel Hamas conflict hasn’t directly disrupted major oil production or shipping routes, yet it kept a premium in prices because of potential escalation risks involving Iran and broader regional instability.
With that immediate threat receding, at least temporarily, the market is refocusing on fundamentals. And those fundamentals present a mixed picture. OPEC+ leadership continues to bring more production online gradually, adding supply to markets. Meanwhile, demand growth, while positive, hasn’t been as robust as some analysts expected earlier in the year.
Over the past month, crude prices have declined 2.10 percent, and they’re down 16.78 percent compared with the same period last year. That longer term decline reflects ongoing concerns about global economic growth, particularly in China, and questions about whether demand will keep pace with increasing supply as OPEC+ producers gradually restore output.
The strengthening of the dollar index against a basket of major currencies also weighed on oil prices Thursday. A firmer greenback makes dollar denominated commodities like crude more expensive for holders of other currencies, which can dampen demand at the margins.
For Ghana and other oil importing nations, the ceasefire driven price decline offers modest relief on energy costs, though the impact depends on how sustained the peace agreement proves to be. West African countries have been managing fuel subsidy pressures and inflation concerns linked partly to global oil prices, so any sustained easing in crude markets could provide some fiscal breathing room.
Yet traders remain cautious about declaring victory over elevated prices. Ceasefire agreements in the Middle East have a history of fragility, and the current deal represents just the first phase of what’s supposed to be a longer process. If negotiations stall or violence resumes, that geopolitical premium could return quickly.
What’s clear is that oil markets are entering a new phase where geopolitical risk premiums may matter less than they have for the past two years. That shifts attention back to supply and demand fundamentals, production decisions by OPEC+, inventory levels, and economic growth trajectories in major consuming nations.
For now, prices are finding a floor above $60 for WTI and $65 for Brent, supported by relatively tight inventories and decent demand. But the removal of the war premium means traders will be watching economic data and production decisions more closely than headlines from the Middle East, at least until something changes to bring geopolitical concerns back to the forefront.
Source: newsghana.com.gh
