Oil futures fell about 1.5% on Friday, capping a week of declines driven by reduced Chinese demand and optimism over a potential Gaza ceasefire that could ease Middle East tensions and alleviate supply concerns.
According to Reuters, Brent crude settled down $1.24, or 1.5%, at $81.13 a barrel, while West Texas Intermediate (WTI) crude ended $1.12, or 1.4%, lower at $77.16 a barrel.
For the week, Brent was down more than 1%, and WTI fell beyond 3%.
“Yesterday’s better-than-expected U.S. GDP growth figures initially supported the crude market,” said George Khoury, global head of education and research at CFI.
“However, these gains were overshadowed by concerns about declining Chinese oil demand.”
Data released last week showed that China’s total fuel oil imports dropped 11% in the first half of 2024, raising concerns about the wider demand outlook in China.
“The Chinese demand situation is going down the tubes here and crude oil prices are going down with it,” said Bob Yawger, director of energy futures at Mizuho in New York.
He added that China’s economy is threatening to enter a deflationary cycle, where prices fall due to declining demand.
“And that is about the worst possible scenario for a country that is the largest importer of crude oil on the planet,” Yawger said.
Meanwhile, demand from the world’s top oil consumer, the U.S., is also expected to ease as refiners prepare to cut back production with the end of the summer driving season in early September.
Valero Energy, the nation’s second-largest refiner, announced that its 14 refineries would run at 92% of combined capacity in the third quarter, down from 94% in the second quarter.
In the Middle East, hopes of a ceasefire in Gaza have been gaining momentum.
U.S. officials believe the parties are closer than ever to an agreement for a six-week ceasefire in exchange for the release of female, sick, elderly, and wounded hostages held by Hamas.
Baker Hughes’ count of U.S. oil drilling rigs, an early indicator of future output, increased by five to 482 this week and by three in July, marking the first monthly increase in the number of rigs since March.
