Oil Plummets As Ukraine Incursion Could Replace Gaza In Swaying Trading Activity

Meanwhile, China's economic woes continue to pressure prices: File Image/Pixabay

Washington's insistence that a Gaza ceasefire deal may be nearing success combined with the aftermath of weak economic news from China caused another session of losses for oil on Monday, this time on the order of 3 percent for one key benchmark.

Brent settled down $2.02, or 2.5 percent, at $77.66 per barrel, while West Texas Intermediate settled down $2.28, or 3 percent, at $74.37 per barrel.

U.S. Secretary of State Antony Blinken stated on Friday with regard to the ceasefire talks that "I believe we're inside the 10-yard line and driving toward the goal line in getting an agreement that would produce a ceasefire, get the hostages home and put us on a better track to trying to build lasting peace and stability."

This was accompanied by the United Nations' highest court stating that Israel's occupation of Palestinian territories and settlements are illegal and should be withdrawn as soon as possible.

On Monday, Blinken further created the impression of something happening in the talks by remarking that they were "probably the best, maybe the last opportunity" and implored all stakeholders to ratify the agreement.

But as was the case in past statements issued by the U.S. that caused analysts to worry less about supply risks, the wild card remained Israel, which reiterated its commitment to freeing the hostages captured by Hamas and protecting its security needs.

Bloomberg on Monday noted that crude had given up most of its year-to-date gains "as the lift from OPEC+ supply curbs and expectations for lower U.S. interest rates have been countered by the challenging outlook in China…...the Organization of the Petroleum Exporting Countries has said that it may loosen output curbs in the final quarter, although that plan could change if conditions shift."

Analysts drilling into the data about China noted that the most disturbing development was home prices falling faster than they have at any point in nine years, as well as deep cuts in July refinery processing rates - the latter due to weak demand for fuel.

Brian Leisen, global oil analyst at RBC Capital Markets, told clients in a note that "The bearish view is simple, and in the medium term, slowing economic activity, weakness in Asia, and softer refinery margins all don't bode well for crude prices going into year-end."

In other oil news on Monday, the blaze at Russia's Kavkaz oil and petroleum storage facility in Rostov continued after it was targeted in a Ukranian drone strike; media speculated  that Ukraine's ground incursion into the former Soviet Union could be seen as crossing a red line due to the fact that Western countries are arming Kyiv for these operations.

Hence, this could be a much more potent source of geopolitical tension than Gaza in terms of swaying oil prices in the near future.