By Adedapo Adesanya
Oil depreciated by more than 2 per cent a barrel on Monday amid the prospect of successful Middle East peace talks reducing supply risks while leading oil importer China’s economic weakness threatened to curb demand.
Brent crude futures settled at $77.66 a barrel after losing $2.02 or 2.5 per cent, as the US West Texas Intermediate (WTI) crude futures traded at $74.37 a barrel after it shed $2.28, or 3 per cent.
On Monday, the US Secretary of State, Mr Antony Blinken, said the latest diplomatic push by the US government to achieve a ceasefire deal in Gaza was “probably the best, maybe the last opportunity.”
He also implored all stakeholders to get the agreement over the finish line.
The Prime Minister of Israel, Mr Benjamin Netanyahu, “reiterated Israel’s commitment to the latest American proposal regarding the release of our hostages – taking into account Israel’s security needs.”
Market analysts noted that the market is under pressure under expectations that all parties will continue to hammer away at the ceasefire talks.
China’s economic problems also pressured oil prices, with data last week showing new home prices falling at the fastest pace in nine years.
Chinese refineries sharply cut crude processing rates last month in response to weak fuel demand.
These are indicators that the Chinese economy will not be recovering as swiftly as was anticipated.
Both crude benchmarks had dropped near 2 per cent on Friday as investors tempered their Chinese demand growth expectations, but received support after US data showed inflation was moderating despite robust retail spending.
The approaching end of peak driving season in the US is another factor weighing on prices.
In the meantime, markets will be waiting for any further indications that the US Federal Reserves may still proceed with an interest rate cut in September, which in turn would boost economic activity and likely lead to an increase in oil prices.
Despite this, supply risks from continued tensions in the Middle East and the escalation of the Russian-Ukraine war are underpinning the market.