Oil prices dipped on Tuesday, hovering near a two-week low 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.
Brent futures for October delivery fell 27 cents, or 0.4%, to $77.39 a barrel by 11:46 a.m. EDT (1546 GMT). U.S. West Texas Intermediate (WTI) crude for September fell 21 cents, or 0.3%, to $74.16 on its last day as the front-month.
The more actively traded WTI futures for October, which will soon become the front-month, were down about 27 cents to $73.39 per barrel.
“We expect a volatile session today as efforts toward an Israeli/Gaza ceasefire appear to be gaining enough traction to announce an official deal,” analysts at energy advisory firm Ritterbusch and Associates said in a note.
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 resolved in talks this week.
“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.
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.
“The main culprit is China, whose economic struggles are mirrored in falling product exports figures, sluggish refinery runs and waning thirst for foreign crude oil,” Tamas Varga, an analyst at oil broker PVM, said.
U.S. prices for heating oil futures fell 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.
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 2.9 million barrels of crude out of storage during the week ended Aug. 16.
If correct, that would be the seventh time U.S. crude 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).