Oil Prices Dip Amid Concerns Over China Demand and Middle East Ceasefire Prospects

Oil prices edged lower on Thursday as concerns over weak demand in China, the world’s largest crude importer, and expectations of a possible ceasefire deal in the Middle East outweighed the previous session’s gains. The gains had been driven by larger-than-expected declines in U.S. crude inventories.

Brent crude futures for September dropped 59 cents, or 0.7%, to $81.12 a barrel by 0630 GMT. U.S. West Texas Intermediate (WTI) crude for September also fell, losing 61 cents, or 0.8%, to $76.98 per barrel.

The market had seen a brief respite on Wednesday, with both benchmarks rising after the U.S. Energy Information Administration (EIA) reported a significant draw in crude inventories. U.S. crude stocks fell by 3.7 million barrels last week, exceeding analysts’ expectations of a 1.6-million-barrel decline. Additionally, gasoline stocks dropped by 5.6 million barrels, far surpassing the anticipated 400,000-barrel draw, while distillate stockpiles decreased by 2.8 million barrels, contrary to forecasts for a 250,000-barrel increase.

Additionally, a downturn in U.S. stock markets has dampened traders’ risk appetite. All three major indexes on Wall Street closed lower on Wednesday, contributing to a more cautious trading environment.

In the Middle East, efforts to broker a ceasefire in the Gaza Strip between Israel and Hamas, under a plan outlined by U.S. President Joe Biden and mediated by Egypt and Qatar, have gained traction. On Wednesday, Israeli Prime Minister Benjamin Netanyahu hinted at a potential “deradicalized” post-war Gaza in a speech to the U.S. Congress, suggesting a possible future alliance between Israel and Arab states.

Meanwhile, in Canada, wildfires continue to burn across the western provinces of British Columbia and Alberta, including near the oil sands hub of Fort McMurray. These fires add another layer of complexity to the global oil market’s dynamics.