Oil prices fell to a two-week low on Tuesday as easing tensions in the Middle East and weakening economic indicators from China influenced global crude values.
Brent crude, the global benchmark, decreased by 46 cents to settle at $77.20 per barrel. U.S. West Texas Intermediate (WTI) crude, which will soon transition from the front-month contract, fell 33 cents to end at $74.04.
The more actively traded WTI futures for October dropped by 49 cents to $73.17 per barrel.
The decline comes amid a period of relative calm in the Middle East, particularly with the recent acceptance of a proposal aimed at addressing disagreements over a ceasefire deal in Gaza.
This has contributed to a reduction in the geopolitical risk premium that had previously inflated oil prices.
U.S. Secretary of State Antony Blinken’s diplomatic efforts in Egypt have been pivotal in pushing for progress on a ceasefire and the release of hostages. Although significant differences remain to be resolved in ongoing negotiations, the market has reacted positively to the potential stabilization of the region.
However, the market remains cautious as conflicts between Israel and Hamas continue, and traders are closely monitoring developments for any sudden changes that could impact supply dynamics.
According to Svetlana Tretyakova, senior analyst at Rystad Energy, “The markets will remain highly sensitive to any developments in the region.”
Adding to the pressure on oil prices are economic signals from China. The world’s second-largest economy has shown signs of significant slowdown, with new home prices falling at their fastest rate in nine years, and industrial output, export, and investment growth all dipping.
This economic weakness has raised concerns about reduced fuel demand, further weighing on crude oil prices.
In the United States, worries about fuel demand have also been exacerbated by a decline in refining profit margins.
Heating oil futures have hit their lowest levels since May 2023, and gasoline futures have dropped to their lowest point since February 2024.
Analysts from Gelber and Associates noted that refinery companies, including PBF Energy, Phillips 66, and Marathon, have responded to these market pressures by cutting their capacity rates.
On the inventory front, U.S. oil storage data will be closely watched, with the American Petroleum Institute (API) and the U.S. Energy Information Administration (EIA) set to release figures this week.
Analysts anticipate a withdrawal of around 2.7 million barrels of crude oil from storage for the week ending August 16, marking the seventh decline in U.S. crude stocks over the past eight weeks.