Crude oil prices ticked slightly higher earlier today but soon reversed course as the United States, the European Union and several Arab nations called for a temporary ceasefire between Israel and Lebanon.
In more bearish news, the Financial Times reported Saudi Arabia was ready to drop its oil price target of $100 per barrel and boost production to regain market share, according to unnamed sources.
As regards the prospect of a ceasefire between Israel and Lebanon, “This is an important breakthrough on the Lebanon side, given all that has gone on there,” an unnamed U.S. official told media, as quoted by the Times of Israel. Reuters reported that the group, also including France, the UAE, and Saudi Arabia, had called for an immediate ceasefire in Lebanon, to last for 21 days, and had also urged warring parties to accept a ceasefire for Gaza.
Israel’s United Nations ambassador, Danny Danon, said the country does not oppose a ceasefire and would prefer a diplomatic solution to the situation, pointing the finger at Iran as “the nexus of violence” in the region, per Reuters, saying it had to be eliminated as a threat if peace in the Middle East was to be restored.
The ceasefire negotiations may well weigh on oil prices, in addition to continued demand pessimism despite the U.S. Energy Information Administration reporting a draw in crude oil inventories for the week to September 20.
A further downward pressure on oil prices came from Libya, where oil flows to export terminals are returning. The rival governments of the country have agreed on a procedure for the appointment of a new governor to the country’s central bank, earlier disagreement on which prompted the shutdown of exports and oil production.
“Any revival in Libyan production would return to a market that is already beset by concerns of weak demand in the U.S. and China,” ANZ analysts said, as quoted by Reuters.
Meanwhile, the latest edition of the Dallas Fed Energy Survey suggested some bullish developments may be on the horizon as activity in the sector edged lower during the third quarter amid uncertainty about the future ahead of the November elections.
By Irina Slav for Oilprice.com
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