Oil prices fell by more than $2 a barrel Monday on the prospect of successful Middle Eastern peace talks reducing supply risks, while leading oil importer China’s economic weakness threatened to curb demand, Reuters reported
Brent crude futures settled at $77.66 a barrel, dropping $2.02, or 2.5%. U.S. West Texas Intermediate crude futures settled at $74.37 a barrel, falling $2.28, or 3%.
“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 on Monday said the latest diplomatic push by Washington to achieve a ceasefire deal in Gaza was “probably the best, maybe the last opportunity” and implored all stakeholders to get the agreement over the finish line.
Israeli Prime Minister Benjamin Netanyahu’s office said he “reiterated Israel’s commitment to the latest American proposal regarding the release of our hostages – taking into account Israel’s security needs.”
“Much of the past week’s selling across the energy complex has represented a reduction in Mideast risk premium,” said Jim Ritterbusch, of Ritterbusch and Associates in Florida.
China’s economic problems also pressured oil prices, with data last week showing new home prices falling at the fastest pace in nine years. Chinese refineries sharply cut crude processing rates last month in response to weak fuel demand.
Both crude benchmarks fell nearly 2% on Friday as investors tempered their Chinese demand growth expectations, but ended the week largely unchanged after U.S. data showed inflation was moderating 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 on prices.
However, supply risks from continued tensions in the Middle East and escalation of the Russian-Ukraine war are underpinning the market, he said.
Energy investors also awaited clues on the U.S. Federal Reserve’s next interest rates decision.
A slim majority of economists polled by Reuters said they expected that the Fed would cut interest rates by 25 basis points at each of the remaining three meetings this year, one more reduction than predicted last month, and that a recession was unlikely.
Rate cuts could stir economic activity in the world’s top oil-consuming country.