By Erwin Seba
HOUSTON (Reuters) -Oil prices fell on Tuesday, falling more than 4% on news of a possible ceasefire between Hezbollah and Israel, although prices found some support on fears of a possible attack on Iran’s oil infrastructure .
futures fell $3.75, or 4.63%, to $77.18 a barrel. U.S. West Texas Intermediate futures ended $3.57, or 4.63%, lower at $73.57 a barrel. At their session lows, both were down more than $4 a barrel.
“We remain very dependent on headlines,” said John Kilduff, partner at Again Capital LLC. “This morning we heard about the possible ceasefire. Then we got indications that targets are still being chosen and that energy targets are in the mix.”
“Hezbollah being open to a ceasefire is the kind of headline that people jump on,” said Phil Flynn, senior analyst at Price Futures Group. “There should be a lot of volatility in this conflict.”
On Monday, Brent rose above $80 a barrel for the first time since August, after a daily gain of more than 3%. That followed the biggest weekly gain in more than a year, about 8%, in the week to Friday on growing concerns about a spreading war in the Middle East.
Hezbollah left the door open to a negotiated ceasefire after Israeli forces raised the stakes in the conflict with the Iran-backed enemy by launching new raids in southern Lebanon.
Israeli Defense Minister Yoav Gallant said it appeared the replacement for slain Hezbollah leader Sayyed Hassan Nasrallah had also been eliminated.
Late on Tuesday, the Israeli army warned people away from specific buildings in Beirut’s southern suburbs.
The oil price surge started after Iran launched a missile attack on Israel on October 1. Israel has vowed to take revenge and said it was weighing its options.
Some analysts said an attack on Iran’s oil infrastructure was unlikely and warned that oil prices could face significant downward pressure if Israel focused on another target.
In the US, Hurricane Milton evolved into a Category 5 storm on its way to Florida after forcing the closure of at least one oil and gas platform in the Gulf of Mexico on Monday.
Oil inventories rose by nearly 11 million barrels last week, while fuel inventories fell, according to market sources citing figures from the American Petroleum Institute on Tuesday.
Crude inventories rose by 10.96 million barrels in the week ended Oct. 4, the sources said on condition of anonymity. Gasoline stocks fell by 557,000 barrels, and distillate stocks by 2.60 million barrels, they said.
