Oil prices rose on Thursday after the largest drop since the pandemic in the previous session, following news that the US and Iran had reached a ceasefire agreement.
However, this ceasefire looks vulnerable amid ongoing attacks on Lebanon by Israel that Iran says violate the terms of their agreement with the United States.
As a result, WTI has rebounded from yesterday’s lows around $91 to trade above $97 as the knee-jerk reaction to the ceasefire agreement fades.
“Subsequent developments suggest that the market is not fully convinced of a sustainable stabilization scenario. Iran later claimed that Israel had violated the agreement, while military activities in the region have not truly ceased,” said Linh Tran, Market Analyst at XS.com.
“As a result, supply disruption risks quickly resurfaced, prompting oil prices to rebound as investors rapidly adjusted their expectations.”
Tran continues to explain that oil prices could remain rangebound in the near term as traders assess whether the ceasefire will hold.
“In the short term, I expect WTI to remain highly volatile and range-bound, likely fluctuating within a broad $90–105 range. The recent sharp declines are not sufficient to confirm a sustained downtrend, but rather reflect temporary repricing phases as the market briefly leans into de-escalation scenarios,” Tran said.
“Conversely, it is important to note that current rebounds in oil prices do not necessarily reflect genuine supply shortages, but are largely driven by the reintroduction of risk premiums. This makes upward moves vulnerable to reversal should positive developments emerge.”