China Prompts A Retreat Back To Bearish Territory For Oil Traders, And Another Week Of Losses

Meanwhile, the perception continues that an Israeli/Hamas ceasefire is near: File Imege/Pixabay

The tentative demand optimism that informed oil trading this week, and was largely a result of positive data from the U.S., proved to be no match on Friday for growing fears about poor demand in China – and as a result oil prices incurred daily as well as weekly losses.

Brent settled down $1.24 at $81.13 per barrel while West Texas Intermediate settled down $1.12 at $77.16 per barrel; for the week, Brent declined over 1 percent while WTI fell over 3 percent.

Ironically, the data that caused a swing back to bearish sentiment was released last week and showed that China's total fuel oil imports dropped 11 percent in the first half of 2024; this despite more recent news that China's central bank had unexpectedly cut interest rates to help revive the economy.

Bob Yawger, director of energy futures at Mizuho, said, "The Chinese demand situation is going down the tubes here and crude oil prices are going down with it," adding that the country may enter a deflationary cycle: "And that is about the worst possible scenario for a country that is the largest importer of crude oil on the planet."

Oil trading on Friday was also said to have been influenced by U.S. officials insisting that Israel and Hamas are close to reaching a ceasefire agreement, even though multiple signals suggest the opposite: Israel most recently caused tensions at the negotiation table by insisting that displaced Palestinians should be screened as they return to Gaza's north, and Egypt rejected Israeli demands to retain control over its border with Gaza.

Meanwhile, Israeli forces also continued to advance deeper into some towns on the eastern side of Khan Younis in southern Gaza.

Also on Friday, the Alberta wildfires kept traders mindful of potential crude flow interruptions as the extent of damage to the resort town of Jasper began to emerge: 358 of the town's 1,113 structures burned down.

However, critical infrastructure was untouched and the Trans Mountain pipeline that cuts through Jasper continued to operate.

Next up as a trading influence: the Organization of the Petroleum Exporting Countries' (OPEC) Joint Ministerial Monitoring Committee meeting, scheduled for August 1, in which the cartel has suggested that it doesn't plan on many any changes to production cut quotas – but analysts worry  that falling oil prices could compel Saudi Arabia and Russia to push for a pullback on any plans to rollback the cuts.