WTI drifts lower to near $68.50 on possible Middle East ceasefire deal

• WTI price attracts some sellers to near $68.55 in Tuesday's Asian session. 
• The possible Middle East peace deal caps the WTI's upside. 
• Expectations for a revival of China's imports could boost the black gold. 

West Texas Intermediate (WTI), the US crude oil benchmark, is trading around $68.55 on Tuesday. The WTI price edges lower after the reports that Israel and Lebanon had agreed to the terms of a deal to end the Israel-Hezbollah conflict, citing unnamed senior U.S. officials. However, the escalating geopolitical tensions, particularly Russia's actions in Ukraine might cap the WTI's downside. 

Israeli and US officials said Israel and Lebanon appear to be close to a ceasefire deal, with the Israeli cabinet set to meet on Tuesday to discuss it, per BBC. Giovanni Staunovo of UBS noted, "It seems the news of a ceasefire between Israel and Lebanon is behind the price drop, though no supply has been disrupted due to the conflict between the two countries and the risk premium in oil has been low already before the latest price decline." 

However, Oil traders will closely monitor the developments surrounding geopolitical risks. Ukraine launched US-made longer-range missiles targeting a military base inside Russian territory last week. In response, Russian President Vladimir Putin warned of lowering its doctrine to use nuclear weapons and fired a hypersonic missile at Ukraine. The escalating geopolitical tensions between Russia and Iran raised concerns over potential supply disruptions, which might boost the WTI in the near term. 

Furthermore, the signs of a recovery in Chinese oil demand lift the black gold price as China is the world's largest crude oil importer. According to LSEG Oil Research, China's crude import may reach 11.4 million barrels per day this month due to price cuts. Additionally, S&P Global estimated that China's oil demand may grow by 1.1% to 17.29 million bpd in 2024 and increase by 1.7% to 17.59 million bpd in 2025.