Aug 20 2024: Oil prices edged lower on Tuesday as Israel accepted a proposal aimed at resolving disagreements obstructing a ceasefire deal in Gaza, easing concerns over potential supply disruptions in the Middle East.
As of 0600 GMT, Brent crude was down 67 cents, or 0.86%, trading at $76.99 per barrel. The front-month U.S. West Texas Intermediate (WTI) crude futures, expiring on Tuesday, were at $73.75 per barrel, down 62 cents, or 0.8%. The more actively traded second-month contract dropped 63 cents, or 0.86%, to $73.03 per barrel.
On Monday, Brent had declined by about 2.5%, while WTI fell by 3%.
“Oil prices are facing headwinds due to developments in the Middle East and concerns about China’s demand outlook,” said Yeap Jun Rong, a market strategist at IG, referencing weak Chinese economic data that has cast doubt on the country’s oil demand prospects.
“The likelihood of a ceasefire deal in Gaza has increased, leading market participants to reduce the perceived risks of geopolitical tensions affecting oil supplies.”
U.S. Secretary of State Antony Blinken announced on Monday that Israeli Prime Minister Benjamin Netanyahu had accepted a “bridging proposal” from Washington to address disagreements blocking a ceasefire deal in Gaza, urging Hamas to do the same.
Easing supply concerns further, production at Libya’s Sharara oilfield has risen to about 85,000 barrels per day, aimed at supplying the Zawia oil refinery, according to two engineers working at the field.
Libya’s National Oil Corporation (NOC) had declared force majeure on oil exports from the Sharara field on August 7 after a blockade by protesters reduced production at the 300,000 barrels per day field.
In the U.S., crude stockpiles were expected to have decreased by 2.9 million barrels last week, according to a preliminary Reuters poll released on Monday.
On the demand side, ongoing worries about China’s economic slowdown pressured oil prices. Following a weak second quarter, the world’s second-largest economy lost further momentum in July, with new home prices falling at the fastest rate in nine years, industrial output slowing, export and investment growth declining, and unemployment rising.
“Concerns about China’s demand persist,” ING analysts noted in a client update. “Recent data suggest weaker Chinese oil demand, and speculators remain hesitant to enter the market.”
Investors are also awaiting indications of the U.S. Federal Reserve’s plans for its next interest rate decision.
The Fed is expected to cut interest rates by 25 basis points at each of the remaining three meetings in 2024, according to a slim majority of economists polled by Reuters, who also indicated that a recession is unlikely.
Rate cuts would reduce borrowing costs and potentially boost oil demand in the world’s largest oil-consuming country.
