(Reuters) – Oil prices fell about 1% to a two-week low on Tuesday as Middle East supply concerns eased after Israel accepted a proposal to tackle disagreements blocking a ceasefire deal in Gaza, and as economic weakness in China weighed on fuel demand.
futures for October delivery fell 46 cents, or 0.6%, to settle at $77.20 a barrel. U.S. West Texas Intermediate (WTI) crude for September delivery fell 33 cents, or 0.4%, to settle at $74.04 on its last day as the front-month.
The more actively traded WTI futures for October, which will soon become the front-month, lost about 49 cents to $73.17 per barrel.
U.S. Secretary of State Antony Blinken visited Egypt and pushed for progress toward a Gaza ceasefire and hostage release deal. Major differences still need to be resolved in talks this week.
“There was probably around $4 to $8 of geopolitical premium baked into the price of crude oil before negotiations began on Thursday,” Bob Yawger, director of energy futures at Mizuho, said in a note.
Israel retrieved the bodies of six hostages from the Gaza Strip as negotiations continued in an effort to bring back more than 100 captives remaining in the besieged Palestinian enclave.
“Despite ongoing ceasefire negotiations, clashes between Israel and Hamas continue, and the markets will remain highly sensitive to any developments in the region,” said Rystad Energy’s senior analyst Svetlana Tretyakova.
“If the market fundamentals don’t break this bearish trend soon, OPEC+ may be hesitant to unwind their voluntary cuts anytime soon.”
OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, has said global oil demand growth must accelerate in coming months or the market will struggle to absorb the group’s planned increase in supply from October.
OPEC member Saudi Arabia, the world’s biggest oil exporter, said crude exports fell to 6.047 million barrels per day (bpd) in June from 6.118 million bpd in May.
Data from China, the world’s second-largest economy, showed new home prices fell in July at their fastest pace in nine years, industrial output slowed, export and investment growth dipped and unemployment rose.
Worries about fuel demand in the U.S., the world’s biggest economy, pressured prices for U.S. futures to their lowest since May 2023 for a second straight day. The heating oil crack spread, which measures refining profit margins, stayed near its lowest since November 2021.
Prices for U.S. gasoline futures fell to their lowest since February 2024.
“Following Q2 (second quarter) earnings, multiple refinery companies have responded to (price and demand) concerns by announcing cuts to capacity rate, including PBF Energy (NYSE:), Phillips 66 (NYSE:) and Marathon,” analysts at energy consulting firm Gelber and Associates said in a note.
U.S. OIL INVENTORIES
Weekly U.S. oil storage data is due from the American Petroleum Institute (API) trade group on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday.
Analysts projected U.S. energy firms pulled about 2.7 million barrels of crude out of storage during the week ended Aug. 16. [EIA/S] [API/S]
If correct, that would be the seventh time stocks declined in the past eight weeks. There was a withdrawal of 6.1 million barrels during the same week last year and an average decrease of 3.4 million barrels over the past five years (2019-2023).
(This story has been refiled to add the missing word ‘be’ in paragraph 4)
