Oil prices fell by 2% on August 19, with Brent crude dropping below $80 per barrel. The decline comes as successful Middle Eastern peace talks seem likely to reduce supply risks, coupled with concerns over weakening demand from China, the world’s largest oil importer.
Oil Prices Drop 2% as Middle East Ceasefire Talks Progress and China's Economic Woes Deepen
In a recent report by Reuters, the price of oil decreased by approximately 2%. On August 19, the global benchmark Brent remained below $80 per barrel amid the possibility that successful Middle Eastern peace negotiations could mitigate supply risks. Additionally, the economic weakness of the world's largest oil importer, China, appeared to be a factor in reducing demand.
By 12:34 p.m. EDT (1634 GMT), Brent crude futures had declined by $1.59, or 2%, to $78.09 per barrel. At $74.94, U.S. West Texas Intermediate crude (WTI) futures were $2.2% lower, or $1.71.
"This market is under pressure under expectations that they're going to continue to hammer away at the ceasefire talks," said Bob Yawger, director of energy futures at Mizuho in New York.
U.S. Secretary of State Antony Blinken stated on August 19 that Washington's most recent diplomatic effort to secure an armistice agreement in Gaza was "probably the best, maybe the last opportunity" and urged all stakeholders to ensure the deal was successfully concluded.
According to Netanyahu's office, the prime minister "reaffirmed Israel's dedication to the most recent American proposal for the release of our hostages, while also considering Israel's security requirements."
Oil prices were also affected by China's economic challenges, as evidenced by data released last week. New home prices were declining at the quickest rate in nine years, and the weak demand for petroleum prompted Chinese refineries to reduce the crude processing rate significantly.
"We currently see long-term trends in global oil demand tilting lower with a much softer than expected Chinese economic recovery providing primary impetus in this regard," said Jim Ritterbusch of Ritterbusch and Associates in Florida.
Chinese Demand Concerns and U.S. Rate Speculation Weigh on Oil Prices Amid Global Supply Risks
Investors reduced their expectations for Chinese demand growth on August 16, resulting in a nearly 2% decline in both petroleum benchmarks. However, the week concluded with little change after U.S. data indicated that inflation declined despite robust retail spending.
"Persistent concerns about slow demand in China led to a sell-off," said Hiroyuki Kikukawa, president of NS Trading, adding that the approaching end of peak driving season in the United States was another factor weighing prices.
Nevertheless, according to him, the market is being supported by supply risks resulting from the escalation of the Russian-Ukraine conflict and ongoing tensions in the Middle East.
Energy investors also anticipated information regarding the U.S. Federal Reserve's forthcoming interest rate decision.
A slight majority of economists surveyed by Reuters predicted that the Federal Reserve would reduce interest rates by 25 basis points at each of the remaining three meetings this year, one more reduction than expected last month. Additionally, they expressed their belief that a recession was improbable.
Rate reductions stimulate economic activity in the world's largest oil consumer.