Oil prices are on track for a third consecutive weekly decline for the week ending July 26, driven by sluggish demand in China, the world’s largest crude oil importer, and ongoing cease-fire efforts in the Middle East, which have deterred traders from incorporating a risk premium into prices.
The International benchmark Brent crude traded at $82.05 per barrel at 2.20 p.m. local time (1120 GMT) on Friday, down by around 0.7% relative to the closing price of $82.63 a barrel on Friday last week.
West Texas Intermediate (WTI), the American benchmark, traded at $77.99 a barrel at the same time on Friday, a decline of about 2.6% from last Friday’s session, which closed at $80.13 per barrel.
Prices were depressed over the week by concerns about demand in China, the world’s largest crude oil importer.
The gross domestic product (GDP) of China rose by 4.7% in the second quarter of 2024, below market expectations, according to official data, which followed figures showing a softness in oil imports.
Although the country unexpectedly lowered a key short-term policy rate and benchmark lending rates on Monday to boost the economy, investors’ sentiment surrounding Chinese markets remained weak.
Uncertainty over the country’s oil demand fuels market players’ fear that imports and refining activity could also remain low.
However, prices received some support on Tuesday and Wednesday following data indicating a decrease in US crude inventories
The American Petroleum Institute (API) reported a 3.9 million barrel decrease in US crude oil inventories late Tuesday, and the Energy Information Administration (EIA) confirmed a weekly decrease of 3.7 million barrels in US commercial crude oil inventories on Wednesday.
Cease-fire efforts in the Middle East, home to a significant portion of global oil reserves, also exerted downward pressure on oil prices by alleviating supply concerns.
Despite the overall downward trend, signs of greater oil demand in the US provided some upward momentum for prices on Thursday and Friday.
Data from the Commerce Department showed that the US economy grew by 2.8% in the second quarter of 2024, surpassing market estimates of 2%.
The current dollar GDP increased by 5.2% at an annual rate, or $360 billion, in the second quarter to reach $28.63 trillion.
The data also prompted increased optimism over a potential interest rate cut by the US Federal Reserve in September. Market players were looking for further evidence that a rate cut would happen at the September meeting.
Experts believe that reducing policy interest rates soon would support economic activity in the country, resulting in higher oil demand.
