WTI crude oil futures fell during the European trading session on Friday (October 10), erasing gains from earlier in the week and bringing the market's weekly performance into negative territory. Oil prices have formed a new "swing top" (short-term high) at $62.92.



Middle East risk premium falls after Israel-Kazakhstan ceasefire

Crude oil prices retreated as geopolitical risk premiums gradually receded following a ceasefire agreement between Israel and Hamas. Under the US-backed agreement, Israel will partially withdraw from Gaza in exchange for the release of hostages and prisoners. The easing of tensions has reduced threats to shipping lanes in the Red Sea and the Suez Canal, which had been key factors supporting crude oil prices in recent months.

"The entry into force of the ceasefire agreement has eased market concerns about the security of global crude oil transportation," said Bjarne Schieldrop of Nordea Bank (SEB). This change is gradually eliminating the war-related risk premium included in oil prices since the end of 2023.

Despite the ceasefire news, OPEC production remains the focus of the market

While the Gaza ceasefire agreement dominated headlines, traders are turning their attention back to the supply outlook. OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) agreed to a smaller-than-expected production increase in November, somewhat alleviating market concerns about oversupply. BMI Research analysts noted that the recent supply increase "has not led to a significant drop in oil prices," supporting a slight weekly gain for Brent crude (the international benchmark).

However, WTI crude oil still fell 0.5% for the week, while Brent crude oil rose 1%. US political risks remain in the market's focus as concerns about a prolonged government shutdown could affect economic activity and energy demand.

Market Outlook: Bearish sentiment rises below the $63 resistance level


(WTI crude oil daily chart source: Yihuitong)

The short-term outlook for WTI crude oil is bearish as technical resistance near the 50-day and 200-day moving averages remains solid and the risk premium in the Middle East gradually disappears.

If a break below $60.02 is confirmed, oil prices could fall further to $55.30 and possibly even $55.12. Traders should watch for additional bearish catalysts, especially supply adjustments from OPEC or a weakening U.S. economy.