Aug 19 2024: Oil prices softened on Monday as concerns over weaker demand in China, the world’s largest oil importer, dampened market sentiment. Investors are also closely monitoring the progress of ceasefire talks in the Middle East, which could potentially reduce supply risks.
Brent crude futures decreased by 45 cents, or 0.56%, to $79.23 per barrel by 0646 GMT, while U.S. West Texas Intermediate (WTI) crude futures fell by 58 cents, or 0.76%, to $76.07 per barrel.
Both benchmarks saw nearly a 2% decline last Friday, as investor optimism regarding demand growth from China waned. However, by the end of the week, prices remained relatively steady, bolstered by U.S. data indicating moderating inflation and robust retail spending.
“Persistent concerns about sluggish demand in China triggered a sell-off,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities. He also noted that the impending end of the peak driving season in the United States contributed to the downward pressure.
Despite these factors, Kikukawa highlighted that ongoing tensions in the Middle East and the escalation of the Russia-Ukraine conflict continue to support the market due to their potential impact on supply.
Recent customs data revealed that China’s diesel and gasoline exports dropped significantly in July, reflecting reduced crude processing rates due to weak profit margins. Additionally, economic data released last Thursday showed that China’s economy lost momentum in July, with new home prices dropping at the fastest rate in nine years, industrial output slowing, and unemployment rising. These indicators have heightened trader concerns about a potential decline in Chinese demand, as refineries cut back on crude processing due to sluggish fuel demand.
Meanwhile, U.S. Secretary of State Antony Blinken arrived in Tel Aviv on Sunday for another round of Middle East diplomacy aimed at securing a ceasefire in Gaza. However, Hamas cast doubt on the mission, accusing Israel of undermining the efforts. The mediating countries—Qatar, the United States, and Egypt—have yet to bridge the gaps in the ongoing, intermittent negotiations, with violence in Gaza continuing unabated on Sunday.