Crude oil slides on potential Gaza ceasefire, China demand concerns

Crude oil futures fell by the most in two weeks on Monday following reports suggesting that a ceasefire and hostage release deal in Gaza could be closer while leading oil importer China’s economic weakness threatens to curb demand.

U.S. Secretary of State Antony Blinken met today with top Israel officials in Jerusalem, and “the market has taken the cue that Blinken’s there, and the efforts by the Egyptians and some of the others to finally get something done, is allowing this selloff to occur,” John Kilduff of Again Capital said, as reported by Dow Jones.

Persistent soft Chinese economic data also is undermining any kind of price strength, Kilduff added.

The prospect of weak demand in China is offsetting any gains from risks to supply, with apparent demand in the country falling 8% Y/Y in July according to government data, following disappointing economic data last week, which shows industrial activity remains subdued, ANZ research analysts said.

Elsewhere, production at Libya’s Waha oil field has returned to normal levels of ~300K bbl/day after pipeline maintenance was completed earlier than expected, Bloomberg reported, while output at the Sharara field has improved to ~85K bbl/day, according to Reuters, nearly two weeks after Libya’s National Oil Corporation had declared force majeure on oil exports from the field following a blockade by protesters at the 300K bbl/day field.

Front-month Nymex crude (CL1:COM) for September delivery ended -2.9% to $74.37/bbl, and front-month October Brent crude (CO1:COM) closed -2.5% to $77.66/bbl, the lowest settlement for both benchmarks since August 6.

U.S. natural gas bucked the trend among energy prices to trade sharply higher, with the front-month September Nymex contract (NG1:COM) closing +5.3% to $2.235/MMBtu, its best settlement since July 22.

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The natgas gains “appeared attributable to several factors rather than one fresh bullish headline,” Ritterbusch analysts said, according to Dow Jones, pointing to hotter temperatures forecast for later this week across much of the U.S., the possibility of further production curbs, and storm premium as peak hurricane season approaches.