Oil Prices Slip Amid Gaza Ceasefire Prospects and Dollar Strength

Oil prices dipped on Friday amidst speculation of an imminent ceasefire in Gaza, potentially easing geopolitical tensions in the Middle East. Additionally, a stronger dollar and subdued U.S. gasoline demand weighed on market sentiment.

Brent crude futures edged lower by 53 cents, or 0.6%, to $85.25 a barrel, while U.S. crude futures shed 52 cents, or 0.6%, to $80.55 per barrel. Despite recent fluctuations, both contracts are expected to close the week relatively flat or with slight declines following a more than 3% increase last week.

Reports of a U.N. draft resolution proposing a ceasefire in Gaza contributed to the downward pressure on oil prices. Meanwhile, renewed profit-taking added to the bearish sentiment, according to analyst Tony Sycamore from IG.

U.S. Secretary of State Antony Blinken expressed optimism about the ongoing talks in Qatar, suggesting a potential agreement for a Gaza ceasefire between Israel and Hamas. Negotiations in Qatar, alongside discussions involving Arab foreign ministers and Egyptian President Abdel Fattah El-Sisi in Cairo, have focused on achieving a truce lasting around six weeks.

In the United States, the world’s largest oil consumer, gasoline product supplied dropped below 9 million barrels for the first time in three weeks, indicating a potential slowdown in crude demand.

However, consultancy firm FGE provided a bullish perspective, highlighting preliminary weekly data for the first half of March showing significant draws in crude and main product stocks at major oil hubs globally. This drawdown, nearly double the 2015 to 2019 average, suggests robust demand for oil.

On the currency front, the U.S. dollar gained strength following a surprise interest rate cut by the Swiss National Bank, bolstering global risk sentiment. A stronger dollar typically makes oil more expensive for investors holding other currencies, potentially dampening demand.