Oil prices little changed as U.S. moves to replenish reserve, Gaza cease-fire still uncertain

• Israel’s War Cabinet voted to continue military operations in Gaza but sent a delegation to Egypt to continue cease-fire talks.
• Hamas accepted a cease-fire proposal Monday that Israel has rejected.
• Chevron CEO Mike Wirth said risk remains to the upside for oil due to the war.

Hundreds of Palestinians, including women and children living in east part of Rafah, migrate to the west part of the Khan Yunis with their few belongings loaded on vehicles following the Israel’s announcement on the evacuation of neighborhoods, in Khan Yunis, Gaza on May 6, 2024.

Crude oil futures were little changed Tuesday as the U.S. moved to replenish the strategic petroleum reserve and a potential cease-fire in Gaza remained uncertain.

The U.S. Energy Department announced a bid for the purchase of 3.3 million barrels to help replenish the strategic petroleum reserve, lifting oil prices earlier in the session before they ultimately closed lower.

The oil market has grown tighter with global inventories declining by 300,000 barrels per day so far this year as OPEC+ has largely adhered to its production cuts, according to a report from the Energy Information Administration.

Here are Tuesday’s closing energy prices:

• West Texas Intermediate June contract: $78.38 a barrel, down 10 cents, or 0.13%. Year to date, U.S. crude oil has gained about 9%.
• Brent July contract: $83.16 a barrel, down 17 cents, or 0.20%. Year to date, the global benchmark has gained about 8%.
• RBOB Gasoline June contract: $2.54 a gallon, down 1.73%. Year to date, gasoline futures have gained about 21%.
• Natural Gas June contract: $2.21 per thousand cubic feet, up 0.55%. Year to date, gas has fallen about 12%.

There remains significant uncertainty surrounding developments in the Middle East which could lead to a sharp increase in oil prices, according to the EIA.

Israel Prime Minister Benjamin Netanyahu said Tuesday the cease-fire proposal accepted by Hamas was “meant to sabotage the entry of our forces into Rafah,” according to the Times of Israel. Netanyahu said the cease-fire proposal was “very far from Israel’s vital demands.”

Oil prices have briefly made moves higher on geopolitical risk in the Middle East for months now before pulling back as no major disruption to supplies has occurred. U.S. crude oil and Brent are both down about 7% since April highs when traders bid up prices on fears that Israel and Iran were on the brink of war.

Chevron CEO Mike Wirth said prices have remained in a relatively stable band but risk remains to the upside for oil due to the war’s proximity to the Strait of Hormuz — the most important global transit point for crude.

“A lot depends on the course of events here, we’re all hoping for an end to the conflict,” Wirth told CNBC at the Milken Institute’s Global Conference in Los Angeles on Monday.

OPEC+ currently has 4 million bpd of spare capacity that could be deployed to address any short-term disruption in supple, according to the EIA.

An Israeli delegation was due in Cairo to continue cease-fire negotiations “to exhaust the possibility of reaching an agreement under conditions acceptable to Israel,” according a statement from Netanyahu’s office.

A truce in the seven-month war remains elusive, said Tamas Varga, analyst at oil broker PVM. It is unclear whether a cease-fire would halt Houthi militant attacks on shipping in the Red Sea, the most material risk to oil so far, Varga said.

“And it would take a bold investor to bet on it,” Varga told clients in a note Tuesday.