(Bloomberg) — Oil extended its decline on cautious optimism about easing tensions in the Middle East and the outlook for a global supply surplus.
West Texas Intermediate crude slumped below $60, while Brent futures slid below $64, the lowest since June. Israel approved a framework that would see Hamas release hostages in exchange for prisoners, a major step toward a peace agreement to end the bloody conflict in Gaza which has destabilized the Middle East.
Meanwhile, oil markets are heading for a significant surplus fueled by rising output from both outside and within the OPEC+ alliance, which agreed to raise production quotas to reclaim market share over the weekend. The broad mood remains bearish, though there are discrepancies about how gloomy crude’s prospects are, according to Citigroup Inc., which summarized views from clients.
“We are heading for a challenging weekly close below $65 which is likely to attract some attention from short sellers,” said Ole Hansen, head of commodities strategy at Saxo Bank, adding that the losses are driven by the peace agreement between Israel and Hamas.
Traders were also on alert after the US sanctioned a key crude-import terminal and a privately-owned Chinese refinery for involvement in the trade of Iranian oil. It’s the latest in a series of penalties this year that have targeted companies in the Asian nation.
Separately, China also slapped port fees on American ships in retaliation for similar US measures, a move that threatened to bolster freight rates.