Oil prices fell on Tuesday after Israel accepted an offer to resolve disputes that have held up a ceasefire in Gaza, helping to ease concerns about supply disruptions in the Middle East.
Brent crude was down 67 cents, or 0.86%, at $76.99 a barrel by 0600 GMT. Front-month U.S. WTI Crude futures, which expire on Tuesday, were down 62 cents, or 0.8%, at $73.75 a barrel. The more actively traded second-month contract was last down 63 cents, or 0.86%, at $73.03 a barrel.
Brent fell nearly 2.5% on Monday, while WTI fell 3%. Prices appear to be finding some headwinds from geopolitical developments in the Middle East and China’s demand outlook, citing weak Chinese economic data that cast doubt on the country’s oil demand prospects.
A ceasefire agreement in Gaza now appears more likely, suggesting that market participants are pricing in risks of geopolitical tensions over oil supply disruptions.
Blinken said on Monday that Israeli Prime Minister Benjamin Netanyahu had accepted a “bridge proposal” from Washington to address disagreements that have prevented a ceasefire in Gaza and urged Hamas to do the same.
Also easing supply concerns, production at Libya’s Sharara oil field rose to about 85,000 barrels a day in a move aimed at supplying the Zawia oil refinery.
The Libyan National Oil Company (NOC) declared force majeure on oil exports from the field on August 7 after protesters blocked 300,000 bpd of production from the field.
A Reuters poll on Monday showed U.S. crude stocks were expected to fall by 2.9 million bpd last week.
On the demand side, concerns about China’s economic woes are weighing on oil prices. After a poor second quarter, the world’s second-largest economy lost momentum further in July, with new home prices falling at their fastest pace in nine years, industrial production slowing, export and investment growth falling and unemployment rising. Recent data releases reinforce the view that China is underperforming.
“Last week’s trade and industrial production figures showed that oil demand continued to trend lower in July. These concerns mean speculators remain hesitant to enter the market.”
Investors are also waiting for an indication of the U.S. Federal Reserve’s plans for its next interest rate decision. The Fed will cut interest rates by 25 basis points over the remaining three meetings in 2024, suggesting a recession is unlikely.
The rate cuts lower borrowing costs and could boost oil demand in the world’s largest oil-consuming nation.
