Oil slips for 3rd week straight over China demand fears, war on Gaza

By Al Mayadeen English
Source: Agencies
26 Jul 2024 23:42

The energy market monitors a meeting between US, Israeli, Egyptian, and Qatari officials that could lead to a ceasefire deal in Gaza.

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A picture shows the Nassiriya oil field in Iraq's southern Dhi Qar Governorate, on August 21, 2022 (AFP)

Crude oil prices are experiencing their third straight week of declines, marking the worst downturn since May. Concerns about reduced demand in China drive this decline - the world's largest oil importer and the second-largest consumer after the United States.

Just a few hours ahead of the trading week's end, US West Texas Intermediate (WTI) crude was down 4.7% to $76.41 per barrel, while UK Brent crude fell 2.6% to $80.50 per barrel. These declines follow back-to-back weekly losses and are the largest since early May.

For July, WTI is down 5.4% and Brent 6%, making it the poorest month in three for oil bulls. This downturn has dampened the 2024 oil rally, leaving WTI up just 6.6% for the year and Brent up 4.5%.

The recent drops came after data showed an 11% decrease in China's fuel oil imports in the first half of 2024.

“China’s apparent oil demand fell by 8.1% in June to 13.66 million barrels per day, raising concerns about consumption,” energy market analyst Arslan Ali wrote on the FX Empire portal.

The outlook for Chinese oil demand is bleak, adding to market anticipation of a possible ceasefire in the Israeli war on Gaza amid reports of a new four-way meeting between the US, Israelis, Egypt, and Qatar in Rome.

Previously, the proximity of the war on Gaza to major oil producers like Saudi Arabia, Iran, and the UAE had supported the 2024 oil rally, especially following some disruptions in crude shipments. A ceasefire could reduce the geopolitical risk premium that has been supporting crude prices.

Recent consumption numbers for US crude, gasoline, and distillates have been exceptionally high, countering some negative market sentiment for oil.

The US Energy Information Administration (EIA) reported a crude inventory decline of 3.741 million barrels for the week ending July 19, following a previous week’s drop of 4.87 million barrels.

Over the past four weeks, US crude inventories have decreased by nearly 25 million barrels. Gasoline inventories also fell by 5.572 million barrels in the latest week, compared to a build of 3.328 million barrels the week before, while analysts had predicted a build of 1.4 million barrels. Gasoline, being the primary motor fuel, constitutes the largest part of the US energy mix.

The EIA also reported a decrease of 2.753 million barrels in distillate inventories, contrary to analysts' expectations of a 1.53 million barrel increase, following the previous week's build of 3.454 million barrels.