Oil prices down to four-month lows amid OPEC+ decision, cease-fire talks

Oil prices fell to four-month lows on Tuesday following the OPEC+ decision to gradually phase out output cuts until the end of September 2025 and on allayed supply concerns with cease-fire hopes in Gaza.

International benchmark Brent crude traded at $77.39 per barrel at 10.23 a.m. local time (0723 GMT), a drop of 1.24% from the closing price of $78.36 per barrel in the previous trading session.

The American benchmark West Texas Intermediate (WTI) traded at $73.07 per barrel at the same time, a 1.54% fall from the previous session that closed at $74.22 per barrel.

The Organization of Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, declared on Sunday that the group agreed to extend additional voluntary cuts of 2.2 million barrels per day (bpd), announced in November 2023, until the end of September 2024.

However, the cuts of 2.2 million bpd will be gradually phased out on a monthly basis until the end of September 2025.

Furthermore, the group announced that the 300,000 bpd production increase in the United Arab Emirates (UAE) will be phased in gradually from January 2025 until the end of September 2025.

This decision put downward pressure on oil prices by easing supply concerns, despite the output cut decision taken by the OPEC+ group.

Meanwhile, growing cease-fire possibilities in the Middle East, home to the vast majority of global oil reserves, alleviated supply angst.

US President Joe Biden confirmed Israel's "readiness to move forward" with a cease-fire proposal presented to Hamas last week during a call with Qatari Emir Tamim bin Hamad al-Thani, the White House said Monday.

During their conversation, Biden "confirmed that the comprehensive cease-fire and hostage release deal now on the table offers a concrete roadmap for ending the crisis in Gaza," the executive mansion said in a statement.

The plan was presented to Hamas on Thursday night. The White House said earlier Monday that it is "awaiting" the Palestinian group's official response.

Hamas, for its part, said it will "respond positively to any proposal that includes a permanent cease-fire, a full withdrawal from the Gaza Strip, reconstruction efforts, the return of the displaced, and the completion of a comprehensive hostage exchange deal."

On the other hand, uncertainties about when the US Federal Reserve (Fed) will start cutting interest rates continue to raise demand concerns.

Analysts consider it more likely that the Fed will cut interest rates this year, following data released by the Institute for Supply Management (ISM) on Monday. The probability of the Fed's first rate cut in September rose to 68%, to 98% for November, and to 58% for December.

Low interest rates make the US dollar weaker against other currencies, making oil cheaper. This generates stronger demand, limiting further price falls.