Oil prices fall amid weak Chinese demand, hopes of Middle East ceasefire
Date
8/19/2024 8:59:40 AM
(MENAFN) Oil prices experienced a slight decline during early Asian trading on Monday, driven primarily by concerns over weakening demand in China, the world's largest oil importer. Market sentiment was further affected as investors kept a close watch on progress in Middle East ceasefire negotiations, which, if successful, could alleviate some of the supply risks currently influencing the market. By 0032 GMT, brent crude futures had dipped by 13 cents, or 0.2 percent, to USD79.55 per barrel, while West Texas Intermediate (WTI) crude futures similarly fell by 13 cents, or 0.2 percent, to USD76.52 per barrel.
The slight downturn in oil prices followed a more significant drop of around 2 percent in both benchmarks when contracts settled on Friday. This previous decline was attributed to investors tempering their expectations regarding China's potential demand growth, although the overall weekly performance of oil prices remained relatively unchanged due to mixed signals from U.S. economic data. Last week, reports indicated a slowdown in U.S. inflation coupled with strong retail spending, which helped balance the market to some extent.
Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, pointed out that ongoing concerns about China's slowing demand were a significant factor in the recent wave of selling. He also noted the approaching end of the peak summer driving season in the United States as another contributor to the market's cautious outlook. Despite these bearish factors, tensions in the Middle East and the escalating conflict between Russia and Ukraine continue to provide some support to oil prices due to the potential risks these geopolitical issues pose to supply stability. In particular, China's economic data released on Thursday highlighted a loss of momentum in July, with new home prices falling at the fastest rate in nine years, a slowdown in industrial production, and rising unemployment, all of which have raised alarms among traders about reduced demand from China. This concern was exacerbated by reports of Chinese refineries sharply cutting crude processing rates due to weak fuel demand.
Meanwhile, diplomatic efforts in the Middle East, particularly those led by U.S. Secretary of State Antony Blinken, who arrived in Israel on Sunday to push for a ceasefire in Gaza, are being closely monitored. However, the mission has faced setbacks, with Hamas accusing Israel of undermining the peace efforts. Despite months of intermittent negotiations facilitated by Qatar, the United States, and Egypt, no substantial progress has been made, and violence in Gaza continued unabated on Sunday. This ongoing conflict adds another layer of uncertainty to the oil market, as any escalation could disrupt supply routes and further impact global oil prices.
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