Brent falls below $80 on talk of Lebanon-Israel ceasefire

By Myra P. Saefong and Isabel Wang

Traders also show disappointment over lack of fresh China stimulus

A rally in oil prices took a pause on Tuesday as the militant group Hezbollah reportedly said it supports efforts by Lebanon for a ceasefire with Israel, helping to ease tensions in the oil-rich Middle East.

Traders, who have been waiting to see how Israel might respond to last week's Iranian missile attack, also showed disappointment over a lack of new economic stimulus measures from China following that country's return to business from a national holiday.

Price moves

-- West Texas Intermediate crude CL00 for November delivery CL.1 CLX24 fell $3.11, or 4%, to $74.03 a barrel on the New York Mercantile Exchange after posting a gain of 3.7% on Monday.

-- December Brent crude BRN00 BRNZ24, the global benchmark, dropped by $2.85, or 3.5%, to $78.08 a barrel on ICE Futures Europe, a day after settling at $80.93, the highest since late August.

-- November gasoline RBX24 was off 3.8% to $2.0713 a gallon, while November heating oil HOX24 was down 3.9% to $2.3035 a gallon.

-- Natural gas for November delivery NGX24 traded at $2.751 per million British thermal units, up 0.2%.

Market drivers

Oil prices looked to give back what they had gained a day earlier and then some, but they remained nearly 9% higher month to date, after Iran fired at least 180 ballistic missiles at Israel last week, raising fears that Israel might retaliate by hitting Iranian oil installations.

On Tuesday, Hezbollah deputy chief Naim Qassem said the Lebanese militant group supported Lebanon's efforts for a ceasefire with Israel, according to a report from Agence France Presse. That follows Israeli strikes in Lebanon that killed Hezbollah leader Hassan Nasrallah.

"Whether Israel will accept the ceasefire without a full and unconditional surrender from Hezbollah is unclear," which means Israel's operation in Lebanon may continue, Phil Flynn, senior market analyst at the Price Futures Group, told MarketWatch.

Adding to the concern is the dampening fuel demand from China amid disappointment that Beijing announced no further stimulus measures as investors returned from a weeklong holiday.

See: China's stock-market resurgence hits roadblock on lack of new stimulus measures

Even so, oil prices have climbed since the start of October amid "escalating tensions in the Middle East," said Lukman Otunuga, manager for market analysis at FXTM. Iran's attack on Israel raised fears over a wider conflict in the region, "leaving investors on edge and fueling supply-side fears."

In the U.S., Hurricane Milton intensified into a Category 5 storm Monday on its way to Florida before dropping to Category 4. It appeared likely to avoid hitting the bulk of the oil and natural-gas facilities in the Gulf of Mexico.

Reuters reported on Monday that at least one oil and gas platform in the Gulf of Mexico was shut and that Florida ports had imposed restrictions on vessel navigation as the hurricane rapidly intensified. Milton is expected to make landfall on Wednesday evening.

Looking ahead, Otunuga said key economic data form the U.S., including the consumer-price index report due out Thursday, could "spell more volatility this week" for oil.

"Ultimately, there are many forces influencing oil prices, and this may translate to significant price swings," he told MarketWatch.

-Myra P. Saefong -Isabel Wang

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10-08-24 1021ET

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