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Oil Prices Start the Week Lower on Hopes of a Diplomatic Solution in Gaza

Crude oil began trade this week with a loss after Israel said it was done with bombing southern Gaza for the time being, suggesting a decline in supply disruption risk.

Both Brent crude and West Texas Intermediate were modestly down after trade opened in Asia, with the decline possibly moderated by news of another Houthi attack on a vessel in the Red Sea.

However, a recent statement from the Iranian foreign minister added to the downside potential in oil, after the official said “Developments in Gaza are moving toward a diplomatic solution.”

The statement was made after Hossein Amirabdollahian visited Lebanon for talks with senior Hamas officials.

In further bearish news, Plains All American Pipeline said in its 2023 financial report presentation it expected oil production from the Permian to break another record this year, reaching 6.4 million bpd, Bloomberg reported earlier today.

The report also noted a new oil demand forecast by Goldman Sachs, which pointed out expectations of further EV expansion in China, undermining oil demand.

Also on the bearish side, the Fed signaled once again it had no immediate plans for rate cuts, which is bound to keep oil price range-bound for the time being.

On the bullish side, the Houthis have attacked yet another ship in the Red Sea, according to a statement from the United Kingdom Maritime Trade Operations authority. The UKTMO reported earlier today that a ship’s captain had signaled the vessel had been hit by two missiles in the Bab el-Mandeb strait off the coast of Yemen.

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The Yemeni Houthis have kept attacking ships moving through the Red Sea despite retaliatory attacks by the U.S. and the UK against targets on land. Most traffic has been rerouted from the Middle East to Africa, with positive implications for oil demand as the rerouting adds more than a week to the average journey from Asia to Europe.

By Irina Slav for Oilprice.com

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