Oil prices fell in global markets, ending a three-day winning streak after Israel, Lebanon and the United States announced a tentative ceasefire agreement.
The benchmark Brent crude fell in recent trading to reach about $97 per barrel, while the US West Texas Intermediate crude hovered near the level of $96 per barrel, after both crudes recorded strong gains of nearly 10% during the first three sessions of this week.
These declines have partially curbed price jumps caused by recent field clashes and declining optimism about supplies.
Dwindling inventories and expectations of price jump
U.S. government data showed a sharp decline in crude inventories at Cushing's Cushing Center in Oklahoma, the main delivery point for West Texas crude, for the sixth week in a row.
Stockpiles have fallen to levels near the operational minimum, reflecting a rapid decline in global reserves in conjunction with the de facto paralysis of the dual-blocked waterway.
Robert Rennie, head of commodity research at Westpac Banking Corp., predicted that Brent crude would jump to levels of up to $130 per barrel during the fourth quarter of this year as a result of the expected aggressive tightening in the crude and oil products markets.
He noted that Lebanon's truce agreement may only reduce upside risks in the short term, but markets remain threatened as long as the Strait of Hormuz is closed and vessel movement is limited.
Gold prices rise
Gold rose as much as 1.1% to above $4,480 an ounce, recouping part of the previous session's decline, as buyers returned to the market.
Spot gold was up 0.7% at $4,467.12 an ounce at 3:03 p.m. Singapore time. Silver was up the same percentage to $73.19 an ounce. Platinum and palladium were also higher. The Bloomberg Spot Dollar Index, a measure of the U.S. currency, was down 0.1%.
Gold prices have largely moved in inverse relationship with oil since the conflict erupted at the end of February, falling sharply in the early days of the war, and are still about 15% below their pre-war level, but have moved in a limited range over the past few weeks. Oil prices fell after three days of gains following news of the deal between Israel and Lebanon.
Hebei Chen, an analyst at Vantage Markets in Melbourne, believes that in terms of gold, the ceasefire between Israel and Lebanon "has eased the short-term pressures caused by higher bond yields and the dollar. The decline in gold towards a long-term trend line is attracting buyers when it falls back into the market."
But without a more comprehensive settlement of the conflict, inflationary pressures are expected to continue. Lori Logan, president of the Dallas Fed, said officials may need to raise interest rates later this year to bring inflation back to the U.S. central bank's 2% target.
"With inflation concerns persisting and the Fed's rate hike expectations for at least early 2027, gold is finding it difficult to make any serious recovery," TD Securities analysts Ryan McKay and Bart Milick said in a note.