(Bloomberg) — Oil held the biggest drop in more than two weeks as the US said Israel accepted a cease-fire proposal to halt the war in Gaza, potentially easing supply risks as concerns about the demand outlook mount.
Brent crude traded below $78 a barrel after shedding 2.5% on Monday, while West Texas Intermediate was near $74. Secretary of State Antony Blinken said the next step was for Hamas to agree to the proposal aimed at de-escalating the 10-month old conflict in the Middle East, a major crude-producing region.
On the demand side, meanwhile, China’s economic malaise continues to remain top of mind for traders after recent data showed shrinking factory activity and a decline in oil demand. The nation is the world’s largest importer.
Crude has given up most of its year-to date gains as the lift from OPEC+ supply curbs and expectations for lower US interest rates have been countered by the challenging outlook in China. The Organization of the Petroleum Exporting Countries has said that it may loosen output curbs in the final quarter of the year, although that plan could change if market conditions shift.
Options markets are signaling that the market is now anticipating a lower risk of crude futures spiking. Brent option skews have returned to their usual bias toward puts — which profit from lower prices — for the first time in about two weeks.
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