Oil prices saw a decline on Thursday as worries over China’s weak demand, the world’s largest crude importer, and the potential progress in Middle East ceasefire talks overshadowed gains from a previous session marked by drawdowns in U.S. oil inventories.
Brent crude futures for September fell by 38 cents, or 0.5%, to $81.33 a barrel as of 0129 GMT. Similarly, U.S. West Texas Intermediate crude for September dropped 33 cents, or 0.4%, to $77.26 per barrel.
The benchmarks had risen on Wednesday, breaking a three-day streak of losses after the Energy Information Administration (EIA) reported a 3.7 million-barrel decrease in U.S. crude inventories for the week. This figure exceeded analysts’ expectations of a 1.6 million-barrel draw, according to a Reuters poll.
U.S. gasoline inventories also fell by 5.6 million barrels, surpassing the anticipated 400,000-barrel drop, while distillate stockpiles decreased by 2.8 million barrels, contrary to expectations of a 250,000-barrel increase, the EIA data indicated.
“Despite the reductions in U.S. crude and gasoline stocks, investor sentiment remains cautious due to fears of declining demand in China and the potential advancement of ceasefire negotiations between Israel and Hamas,” noted Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities.
Chinese oil imports and refinery activities have been subdued this year compared to 2023, reflecting lower fuel demand amid a sluggish economy, as per government data.
Additionally, the downturn in U.S. stock markets has dampened traders’ risk appetite, Kikukawa observed. All three major U.S. stock indices ended lower on Wednesday.
In the Middle East, efforts to broker a ceasefire to end the conflict in the Gaza Strip between Israel and Hamas have gained traction recently, with mediation from Egypt and Qatar under a plan proposed by U.S. President Joe Biden in May.
On Wednesday, Israeli Prime Minister Benjamin Netanyahu outlined a vague plan for a “deradicalized” Gaza in a speech to the U.S. Congress and hinted at a potential alliance between Israel and America’s Arab allies.
“If progress continues in the Middle East ceasefire talks, coupled with ongoing declines in U.S. equities and China’s economic sluggishness, oil prices could retreat to levels seen in early June,” predicted Satoru Yoshida, a commodity analyst with Rakuten Securities.
