Oil prices settled lower on Thursday after Israel and the Palestinian militant group Hamas signed an agreement to cease fire in Gaza.

Brent crude futures closed down $1.03, or 1.6%, at $65.22 a barrel. U.S. West Texas Intermediate crude was down $1.04, or 1.7%, at $61.51.

Israel and the Palestinian militant group Hamas signed an agreement on Thursday to cease fire and free Israeli hostages in exchange for Palestinian prisoners, in the first phase of U.S. President Donald Trump's initiative to end the war in Gaza.

Under the ceasefire deal, fighting will cease, Israel will partially withdraw from Gaza, and Hamas will free all remaining hostages it captured in the attack that precipitated the war, in exchange for hundreds of prisoners held by Israel.

"Crude futures are in a corrective phase as the Israel/Hamas conflict looks to be ending," said Dennis Kissler, senior vice president of trading at BOK Financial.

'WIDE-RANGING' IMPLICATIONS FOR OIL MARKETS

"The peace agreement is a major breakthrough in recent Middle Eastern history – its implications for oil markets could be wide-ranging, from the possibility of a decrease in the Houthis' attacks in the Red Sea to an increase in the likelihood of a nuclear deal with Iran..." Rystad Energy's Chief Economist Claudio Galimberti said in a note.

The Organization of the Petroleum Exporting Countries and allies in OPEC+ agreed on Sunday to a November output hike that was smaller than market expectations, easing oversupply concerns.

Prices had gained around 1% on Wednesday to reach a one-week high after investors viewed stalled progress on a Ukraine peace deal as a sign that sanctions against Russia, the world's second-largest oil exporter, would continue for some time.

Democratic and Republican bills to fund the U.S. government and end a shutdown have not secured the votes needed for passage in the Senate. A prolonged shutdown could dampen the economy and hurt oil demand.

Source: Investing.com