Fortunately, it’s not just about his whims, because he also needs the votes - which he doesn’t have.
That’s what this whole thing is about. The annexation thing was part Netanyahu’s pandering to his right-wing base in the recent cascade of elections, and part him trying to secure himself some sort of legacy after 14 years in office. The thing is, it;s been becoming more and more clear over the past few months that he simply doesn’t have the Knesset votes to annex any of the West Bank and that he probably will never have them without yet another election.
That put him in a bind - withdrawing from his annexation plan would make him look weak, and actually putting it to a vote and failing would make him look even weaker, all while facing increasing anti-corruption demonstrations, a crashing economy and an approaching trial. Worse, even if he somehow passes annexation through the Knesset, he’s realized that the U.S does not have his back, and that the blowback from the rest of the world would be catastrophic. It was damned if he does, damned if he doesn’t.
So he changed the conversation. I hate the guy, but he deserves mad props for what he did - yes, he withdrew from his annexation plans, but he framed it has a concession he made in return for peace with an Arab country, something that virtually the entire Israeli public, left and right, is very much in favor of. The only Israelis who aren’t happy with the deal are the far right and the settler movement, and really, as far as I’m concerned, thinking that they might screw Netanyahu over in the next election makes it even better.