Oil declined as the United States endeavoured to mediate a peace agreement between Israel and Hamas aimed at alleviating geopolitical tensions in the Middle East, Bloomberg reported. Brent crude traded under $89 per barrel following a 2.5 per cent increase last week, while West Texas Intermediate (WTI) edged closer to $83. US Secretary of State Antony Blinken is intensifying efforts to negotiate a ceasefire in Gaza during his visit to the region. The White House announced that Israel has consented to address its concerns and refrain from entering Rafah until meeting with American officials. Crude prices have climbed this year due to OPEC+ supply cuts and escalating tensions in the Middle East, a region responsible for approximately one-third of the world's oil supply. Concurrently, shifting expectations regarding US monetary policy are impacting demand forecasts, with traders awaiting insight from the Federal Reserve meeting scheduled for Wednesday to assess the likelihood of interest rate adjustments this year. Despite the uncertain outlook, spreads between near-term Brent contracts continue to indicate bullish sentiment. The gap between the two closest contracts remains above $1 per barrel in backwardation. Although this figure has slightly decreased from last week's peak, it remains more than double its level from a month ago, according to Bloomberg. "Geopolitical risks have significantly eased," remarked Warren Patterson, head of commodities strategy at ING Groep NV in Singapore. While the bank anticipates a "significant deficit" this quarter, Patterson noted that "the outlook for the second half of the year is less certain and largely dependent on OPEC+ policy." Over the weekend, Russia launched a heavy missile assault on Ukraine, targeting natural gas infrastructure and other facilities. In response, Kyiv retaliated with drones striking an oil refinery in the Krasnodar region, resulting in partial suspension of operations at the Slavyansk plant due to a reported fire, as per state-run news agency Tass.
