Crude oil fell approximately 1.5% on Friday following a weekly decline driven by decreasing demand from China and optimism about a potential ceasefire in Gaza that could alleviate Middle East tensions and supply worries.

Brent crude oil closed at $81.13 per barrel, down $1.24 or 1.5%, while West Texas Intermediate (WTI) crude finished at $77.16 per barrel, dropping $1.12 or 1.4%.

Over the week, Brent decreased by more than 1%, and WTI fell over 3%.

Initially buoyed by better-than-expected U.S. GDP growth figures, oil markets faced setbacks as worries about declining Chinese oil demand took precedence.

China’s total fuel oil imports fell 11% in the first half of 2024, raising concerns about the country’s broader economic outlook.

Bob Yawger, director of energy futures at Mizuho, noted that China’s potential deflationary cycle threatens its status as the world’s largest crude oil importer.

“The Chinese demand situation is going down the tubes here, and crude oil prices are going down with it,” Yawger stated. He emphasized the negative implications of a deflationary trend for global markets.

In the U.S., the demand is also expected to ease as refiners prepare to reduce production with the summer driving season winding down.

Valero Energy, the second-largest U.S. refiner, announced plans to operate its refineries at 92% capacity in the third quarter, down from 94% in the previous quarter.

Meanwhile, progress in negotiations for a ceasefire in Gaza has contributed to the easing of supply concerns.

U.S. officials are optimistic about a potential six-week ceasefire agreement, which would include the release of hostages by Hamas. The prospect of peace in the region has further alleviated fears of supply disruptions.

In the U.S., Baker Hughes reported an increase in oil drilling rigs, with the count rising by five to 482 this week.

This marks the first monthly increase in rig numbers since March, suggesting potential growth in future output.

As the market continues to navigate these developments, the interplay between geopolitical factors and economic indicators will likely shape oil prices in the coming weeks.

The global market remains sensitive to shifts in demand, particularly from key players like China, and the ongoing political dynamics in the Middle East.

Egypt has raised fuel prices by up to 15% as the country looks to cut state subsidies as part of a new agreement with the International Monetary Fund (IMF).

The oil ministry announced increases across a variety of fuel products, including gasoline, diesel, and kerosene.

However, fuel oil used for electricity and food-related industries will remain unaffected to protect essential services.

This decision comes after a pricing committee’s quarterly review, reflecting Egypt’s commitment to align with its financial obligations under the IMF pact.

Egypt is in the midst of recalibrating its economy following a massive $57 billion bailout, orchestrated with the IMF and the United Arab Emirates.

The IMF, which has expanded its support to $8 billion, emphasizes the need for Egypt to replace untargeted fuel subsidies with more focused social spending.

This is seen as a crucial component of a sustainable fiscal strategy aimed at stabilizing the nation’s finances.

Effective immediately, the cost of diesel will increase to 11.5 Egyptian pounds per liter from 10.

Gasoline prices have also risen, with 95, 92, and 80-octane types now costing 15, 13.75, and 12.25 pounds per liter, respectively.

Despite the hikes, Egypt’s fuel prices remain among the lowest globally, trailing only behind nations like Iran and Libya.

The latest increase follows recent adjustments to the price of subsidized bread, another key staple for Egyptians, underscoring the government’s resolve to navigate its economic crisis through tough reforms.

While the rise in fuel costs is expected to impact millions, analysts suggest the inflationary effects might be moderate.

EFG Hermes noted that the gradual removal of subsidies and a potential hike in power tariffs could have a relatively limited impact on overall consumer prices.

They predict that the deceleration in inflation will persist throughout the year.

Egypt’s efforts to manage inflation have shown progress, with headline inflation slowing for the fourth consecutive month in June.

This trend offers a glimmer of hope for the government as it strives to balance economic stability with social welfare.

The IMF and Egyptian officials are scheduled to meet on July 29 for a third review of the loan program. Approval from the IMF board could unlock an additional $820 million tranche, further supporting Egypt’s economic restructuring.

Oil prices gained on Wednesday following the reduction in U.S. crude and fuel inventories.

However, the market remains cautious due to ongoing concerns about weak global demand.

Brent crude oil, against which Nigerian crude oil is priced, increased by 66 cents, or 0.81% to $81.67 a barrel. Similarly, U.S. West Texas Intermediate crude climbed 78 cents, or 1.01%, to $77.74 per barrel.

The U.S. Energy Information Administration (EIA) reported a substantial decline in crude inventories by 3.7 million barrels last week, surpassing analysts’ expectations of a 1.6-million-barrel draw.

Gasoline stocks also fell by 5.6 million barrels, while distillate stockpiles decreased by 2.8 million barrels, contradicting predictions of a 250,000-barrel increase.

Phil Flynn, an analyst at Price Futures Group, described the EIA report as “very bullish,” indicating a potential for future crude draws as demand appears to outpace supply.

Despite these positive inventory trends, the market is still wary of global demand weaknesses. Concerns stem from a lackluster summer driving season in the U.S., which is expected to result in lower second-quarter earnings for refiners.

Also, economic challenges in China, the world’s largest crude importer, and declining oil deliveries to India, the third-largest importer, contribute to the apprehension about global demand.

Wildfires in Canada have further complicated the supply landscape, forcing some producers to cut back on production.

Imperial Oil, for instance, has reduced non-essential staff at its Kearl oil sands site as a precautionary measure.

While prices snapped a three-session losing streak due to the inventory draws and supply risks, the market remains under pressure.

Factors such as ceasefire talks between Israel and Hamas, and China’s economic slowdown, continue to weigh heavily on traders’ minds.

In recent sessions, WTI had fallen 7%, with Brent down nearly 5%, reflecting the volatility and uncertainty gripping the market.

As the industry navigates these complex dynamics, analysts and investors alike are closely monitoring developments that could further impact oil prices.