Oil fell after a choppy session as traders assessed conflicting reports of progress on an agreement to pause the Israel-Hamas war and release hostages.

Al Jazeera reported that Israel had agreed to a ceasefire, but later deleted that post and now says Hamas has received the proposal “in a positive atmosphere.” Bloomberg, meanwhile, reported that negotiations were in the early stages and a breakthrough isn’t expected in the coming days.

The reports sent West Texas Intermediate on a wild ride. The U.S. benchmark erased earlier gains to slide more than 2 per cent before paring those losses and even briefly edging back into positive territory. Crude then faded again, in part because of the shutdown of a major U.S. refinery, and settled near US$74 a barrel.

“It’s a confused and scared market,” said Trevor Woods, chief investment officer of commodities fund Northern Trace.

The spillover from the war in Israel and Gaza, most notably disruptions to shipping in the Red Sea, has been among the key drivers pushing crude futures higher this year. With the US and allies striking the Iran-backed Houthis, concerns had been spreading that the conflict may widen enough to significantly disrupt oil flows.

Yet some market participants see the Middle East risks having a minimal effect on crude prices, with JPMorgan only identifying $2 as “pure geopolitical risk premium.” Traders may have used the algorithmic-led plunge as a buying opportunity to purchase cheap crude.

The “proposal is the first de-escalation in the Middle East,” said Dennis Kissler, senior vice president at Bok Financial. The headlines about the ceasefire triggered long liquidation, and a breach below the 200-day moving average escalated selling pressure, he said.

Meanwhile, physical crude prices were roiled after BP’s Whiting refinery was shut down after a power loss. The refinery is one of the largest users of Canadian oil in the U.S., causing Canadian heavy crude prices to weaken to an $18.60 a barrel discount to WTI.

Oil capped its first monthly gain in four months in January as the Israel-Hamas war dragged on and attacks on commercial shipping in the Red Sea gathered pace. President Joe Biden said this week he’d decided how to respond to last weekend’s assault that killed US troops, without providing details. He said Iran was responsible for providing weaponry, but Tehran denied involvement and vowed to hit back against any strike on its soil or assets abroad.

On Thursday, OPEC+ delegates said Thursday that the group’s members plan to decide in early March whether to extend output cuts into the second quarter. The alliance previously pledged additional curbs of roughly 900,000 barrels a day for the period as global demand growth slows and rival supplies continued to climb.

Prices:

• WTI for March delivery fell 2.7 per cent to settle at $73.82 a barrel in New York.
• Brent for April settlement dropped 2.3 per cent to settle at $78.70 a barrel.