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Oil prices extended losses on Tuesday on signs of easing geopolitical tensions in the Middle East and concerns about China’s fuel demand outlook.
Brent, the benchmark for two thirds of the world's oil, was trading 1.11 per cent lower at $76.80 a barrel at 12.34pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was down 1.17 per cent at $73.50 a barrel.
On Monday, Brent settled 2.54 per cent lower at $77.66 a barrel. WTI closed down 2.97 per cent at $74.37 a barrel.
“Oil hardly got a sentiment boost from improved market mood. The non-escalation of tensions in the Middle East and the sluggish Chinese data keep oil in the hands of the bears,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Israel has accepted a recent proposal put forward by the US to bridge gaps over a potential deal for a ceasefire with Hamas in exchange for the release of hostages, US Secretary of State Antony Blinken said on Monday.
Mr Blinken spoke after meeting Israeli leaders, including Prime Minister Benjamin Netanyahu, earlier in the day. He said it was now up to Hamas to accept the proposal.
China's deepening economic troubles are dampening the market. Recent data has revealed a contraction in factory output and a drop in oil demand from the world's largest importer.
China’s diesel consumption reached 3.9 million barrels per day in June 2024, marking an 11 per cent decrease from the same month last year and the steepest year-over-year decline since July 2021, according to estimates from the US Energy Information Administration.
The country’s gross domestic product expanded by 4.7 per cent in the second quarter of the year, less than its target of 5 per cent growth.
Supply concerns eased following reports of increased production at Libya’s Sharara oilfield, the country’s largest.
Output has been boosted to 85,000 bpd in a move to supply the Zawia oil refinery, located 50km west of the capital, Tripoli, Reuters reported on Monday.
Production is currently averaging between 30,000 bpd and 30 per cent of normal production, Francesco Calzoni, a risk analyst with direct knowledge of the situation, told The National.
Earlier this month, Libya's National Oil Corporation announced it would gradually reduce production at Sharara, citing force majeure due to protests in the region.
The oilfield had been producing 270,000 bpd before the shutdown.
Investors also looked for signals regarding the US Federal Reserve's next interest rate decision.
Fed Chairman Jerome Powell is expected to speak at the central bank’s annual Jackson Hole Economic Policy Symposium in Wyoming.
A 25-basis point (bp) cut is seen as likely, while a larger cut is expected only if the economy faces a severe crisis or downturn, Ms Ozkardeskaya said.
“Would the markets be upset with the idea of a 25bp [basis point] cut instead of a 50bp? Probably not, because a 50bp cut would require a severe economic slowdown, a crisis or a panic mode, which is not good for risk appetite,” she said.
The Federal Open Market Committee has kept the federal funds rate at 5.25 per cent to 5.5 per cent since July 2023.
