Oil prices experienced a decline on Tuesday, remaining close to a two-week low as tensions over Middle East supply lessened following Israel's acceptance of a proposal aimed at resolving issues obstructing a ceasefire agreement in Gaza. Additionally, the economic downturn in China impacted fuel demand. Brent futures for October delivery dropped by 27 cents, or 0.4%, reaching $77.39 a barrel at 11:46 a.m. EDT (1546 GMT). Meanwhile, U.S. West Texas Intermediate (WTI) crude for September decreased by 21 cents, or 0.3%, to $74.16 on its final trading day as the front-month contract. The more actively traded October WTI futures, set to become the front-month soon, fell about 27 cents to $73.39 per barrel.
Analysts from Ritterbusch and Associates anticipate a volatile trading session, noting that efforts towards an Israeli/Gaza ceasefire seem to be gaining momentum for an official announcement. U.S. Secretary of State Antony Blinken's recent visit to Egypt aimed to push forward progress on a Gaza ceasefire and hostage release agreement, although significant differences remain to be addressed in ongoing talks.
Despite ongoing ceasefire negotiations, skirmishes between Israel and Hamas persist, keeping the markets highly responsive to regional developments, according to Rystad Energy's senior analyst Svetlana Tretyakova. She added that unless market fundamentals shift soon, OPEC+ might hesitate to lift their voluntary production cuts.
OPEC+ has emphasized that global oil demand growth must pick up in the coming months to accommodate the group's planned supply increase starting October. Saudi Arabia, the leading oil exporter, reported a decrease in crude exports to 6.047 million barrels per day (bpd) in June from 6.118 million bpd in May. Chinese economic data revealed a sharp decline in new home prices, slowing industrial output, reduced export and investment growth, and increased unemployment.
Tamas Varga from oil broker PVM identified China's economic challenges as the primary factor affecting product exports, refinery operations, and demand for foreign crude oil. U.S. heating oil futures hit their lowest point since May 2023 for the second consecutive day, with the heating oil crack spread remaining near its lowest since November 2021. U.S. gasoline futures also reached their lowest since February 2024.
Weekly U.S. oil storage data is expected from the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA). Analysts predict a withdrawal of approximately 2.9 million barrels of crude oil from storage for the week ending August 16, marking the seventh decline in U.S. crude stocks in the past eight weeks.
