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Oil prices rise on uncertain path to Ukraine ceasefire

Oil prices rise on uncertain path to Ukraine ceasefire

The oil prices recovered on Friday, after losing more than 1% in the previous session. This was partly due to the decreasing prospects for a rapid end to the Ukraine conflict that could bring more Russian energy to Western markets. Brent crude futures rose 54 cents or 0.77% to $70.42 per barrel at 1055 GMT after falling 1.5% in the previous session. U.S. West Texas Intermediate Crude was $67.13 per barrel, up 58c or 0.87% after closing 1.7% lower on Thursday.

Brent and WTI prices are expected to be more or less the same as last Friday's settlement, which saw Brent settle at $70.36 while WTI settled at $67.04.

Brent oil has been hovering around $70 for the last two weeks. Commerzbank analysts wrote in a note that whether it will stay at this level for the next week depends on political news. Russian President Vladimir Putin stated on Thursday that Moscow supports a U.S. proposed ceasefire in Ukraine, in principle. However, he asked for clarifications and conditions which appeared to prevent a rapid end to the fighting.

Tony Sycamore, IG's market analyst, said that "Russian support for a 30-day proposal of ceasefire with Ukraine has decreased confidence in a short-term ceasefire." Trump administration announced on Thursday the expiration of a license allowing financial transactions with Russian institutions to conduct energy transactions. This will increase pressure on Putin to reach a peace deal over Ukraine. Sources say that Chinese state-owned firms also limit Russian oil imports due to sanctions risk.

China and Russia stood with Iran on Friday after the United States demanded that nuclear talks be held with Tehran. Senior Chinese and Russian diplomats said dialogue should only continue based upon "mutual respect", and all sanctions should be lifted.

In a client note, ANZ analysts stated that geopolitical tensions could still disrupt supply. The International Energy Agency warned Thursday that the global oil supply may exceed demand this year by 600,000 barrels a day due to the growth in the United States, and a weaker global demand than expected.

The IEA's estimates of demand growth for the fourth quarter of 2024, and the first three months of 2019, were reduced due to the unstable macroeconomic conditions caused primarily by the escalating tensions in trade between the U.S.

Analysts at Commerzbank said that "high risks on the supply side and increased production from OPEC+" argue against a sustained rise in oil prices.

(source: Reuters)