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Investing.com-- Oil prices dropped on Friday as the signing of a ceasefire between Israel and Hamas dented some of the market’s risk premium.
Concerns over elevated supply and sluggish demand also remained in play, keeping traders skittish as they braced for possibly softer U.S. fuel consumption during the coming winter season. The impact of a prolonged U.S. government shutdown on the American economy and, by extension, fuel demand also remained a source of worry.
Brent oil futures for December fell 2.0% to $63.93 a barrel, while West Texas Intermediate crude futures slipped 2.0% to $60.32 a barrel by 08:53 ET (12:53 GMT). Crude prices notched some gains earlier this week after the Organization of the Petroleum Exporting Countries and allies (OPEC+) hiked production by a smaller-than-expected margin, helping ease some concerns over a supply glut.
Oil slides after Israel-Hamas ceasefire dulls risk premium
Oil prices slid 1.6% on Thursday after Israel and Hamas agreed to the first phase of a U.S.-brokered ceasefire deal.
Hamas is expected to release all of its hostages under the deal, while Israel will cease its strikes against Gaza and withdraw its military from the enclave. The agreement is the first step in a 20-point plan proposed by U.S. President Donald Trump.
While the ceasefire deal did lift market spirits, it sparked losses in oil, as traders priced in a smaller risk premium from geopolitical instability in the Middle East. The two-year war between Israel and Hamas had boosted oil prices, as traders fretted over potential supply disruptions in the region.
Iran-aligned Houthis in Yemen have been carrying out attacks on vessels they perceive to be connected to Israel, a move they have described as one of solidarity with Palestinians in Gaza.
(Ambar Warrick contributed reporting.)