Oil is poised for its third consecutive weekly decline amid growing concerns about demand from China

Oil prices declined on Friday and are set for a third straight week of losses. The drop in prices is due to weak demand in China and the possibility of a ceasefire in Gaza, which could alleviate tensions in the Middle East and ease concerns about oil supply.

The price of Brent crude futures for September decreased by 84 cents or 1.02% to $81.53 a barrel as of 1320 GMT. The price of U.S. West Texas Intermediate crude for September dropped by 78 cents, representing a 1% decrease, to reach $77.50.

During the week, Brent has experienced a decrease of over 1%, while WTI has seen a decline of more than 2%.

Recent data has sparked concern about the broader demand outlook in China, as July 20 figures indicate a significant 11% drop in the country’s total fuel oil imports during the first half of 2024.

“The prices are being affected by macro issues, such as China,” explained Tamas Varga, an oil analyst at PVM. “It appears that the entire commodity sector is facing challenges due to the economic conditions in China.”

According to Charalampos Pissouros, a senior investment analyst at brokerage XM, there are ongoing concerns about the state of the Chinese economy, which is the world’s top crude importer. These concerns could potentially escalate if the Chinese PMIs next week continue to provide an unclear picture.

In the Middle East, there is growing optimism for a ceasefire in Gaza.

After months of negotiations, it seems that the parties involved are on the verge of reaching an agreement for a six-week ceasefire. U.S. officials are optimistic that this deal will be finalized soon, with Hamas agreeing to release female, sick, elderly, and wounded hostages.

The decline in oil prices faced some obstacles, including the threat of production disruptions caused by Canadian wildfires, a significant drawdown in U.S. crude stocks, and ongoing optimism regarding a potential interest rate cut in September following positive economic data, according to PVM’s Varga.