Oil Heads for Weekly Gains After Israel Rejects Ceasefire Offer

OIL PRICE - SINGAPORE, Feb 9 (Reuters) - Oil prices were little changed on Friday, staying on track for weekly gains, with tensions persisting in the Middle East after Israel rejected a ceasefire offer from Hamas.

Brent crude futures LCOc1 slipped 1 cent to $81.62 a barrel by 0334 GMT, while U.S. West Texas Intermediate crude futures CLc1 rose 3 cents to $76.25 a barrel.

Both benchmarks rose about 3% in the previous session as Israeli forces bombed the southern border city of Rafah on Thursday after Prime Minister Benjamin Netanyahu rejected a proposal to end the war in the Palestinian enclave.

The tensions have kept oil prices elevated, with Brent and WTI both set to gain more than 5% for the week.

"The move yesterday seemed a bit excessive on the back of not very much at least in terms of fundamentals," ING's head of commodities research Warren Patterson said.

"I still expect the rangebound trading that we have become accustomed to recently will continue given the comfortable oil balance."

Read Also: Australia Central Bank Warns on Inflation, Market Pushes Out Rate Cuts

U.S. officials made their most pointed criticism so far of Israel's civilian casualties in Gaza as it turned the focus of its offensive to Rafah.

A Hamas delegation arrived in Cairo on Thursday for ceasefire talks with mediators Egypt and Qatar.

While the conflict has propped up prices, there has been no impact on oil production.

Non-OPEC output from Norway and Guyana is increasing while Russia is exporting more crude in February than it planned following a combination of drone attacks and technical outages at its refineries that could undermine its pledge to curb sales under an OPEC+ pact.

Read Also: Malaysia's Top Court Strikes Out Some Islamic Laws in Landmark Case

Under the deal with the Organization of the Petroleum Exporting Countries and allies, called OPEC+, Russia committed to capping crude output at 9.5 million barrels per day (bpd). It is also voluntarily cutting crude exports by 300,000 bpd and fuel exports by 200,000 bpd from the average May-June level.

Deflation risks in China, the world's top crude oil importer, are also weighing on global oil prices, IG analyst Tony Sycamore said.

"I think the lower crude oil price in Asia is largely due to early weakness in China's equity markets and the fallout from yesterday's shocking CPI figure in China which has served to further undermine confidence ahead of the Lunar New Year celebrations," he added.

Read Also: IMF Urges BOJ to End Bond Yield Control, Huge Asset Buying

By Florence Tan

(Reporting by Florence Tan and Stephanie Kelly; Editing by Sonali Paul)