Oil futures fell by about 1.5 percent on Friday, ending the week lower due to declining Chinese demand and hopes for a ceasefire agreement in Gaza that could ease tensions in the Middle East and related supply concerns.
During the week, Brent crude fell by more than 1%, while West Texas Intermediate crude fell by more than 3%. Initially, the better-than-expected U.S. GDP growth figures supported the crude oil market, but these gains were overshadowed by concerns about declining Chinese demand for oil.
Data released last week showed that China’s total imports of fuel oil fell by 11% in the first half of 2024, raising concerns about broader demand prospects in China. This suggests that the Chinese economy is at risk of entering a deflationary cycle, where prices fall due to reduced demand. This is the worst possible scenario for a country that is the largest importer of crude oil on the planet.
Meanwhile, demand from the world’s largest oil consumer is also expected to decline as U.S. refineries prepare to cut production with the end of the summer driving season approaching in early September. In the Middle East, hopes for a ceasefire and relative geopolitical calm have begun to emerge.
The number of oil drilling rigs in the United States, compiled by Baker Hughes, an early indicator of future production, rose by five rigs to 482 this week and by three rigs in July, marking the first monthly increase since March.
