Oil prices fell on Thursday due to mixed demand signals, following significant draws on U.S. inventories while consumption in China, the world’s largest crude importer, remains subdued.
Price Movement: Brent crude futures for September decreased by 74 cents, or 0.9%, reaching $80.97 a barrel by 0855 GMT. U.S. West Texas Intermediate (WTI) crude for September also fell by 74 cents, or 1%, to $76.85.
Inventory Data: On Wednesday, both benchmarks rose after consecutive declines. The Energy Information Administration (EIA) reported that U.S. crude inventories dropped by 3.7 million barrels last week, exceeding analysts’ expectations of a 1.6 million barrel draw from a Reuters poll. Additionally, U.S. gasoline stocks decreased by 5.6 million barrels, far surpassing the anticipated 400,000 barrel draw. Distillate stockpiles also fell by 2.8 million barrels, contrary to the expected 250,000 barrel increase, according to EIA data.
Market Sentiment: “Despite draws in U.S. crude and gasoline stocks, investors remained wary about weakening demand in China. Expectations of advancing ceasefire talks between Israel and Hamas added to the pressure,” said Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities.
China’s Demand: Government data shows that China’s oil imports and refinery runs have been lower this year compared to 2023, due to weaker fuel demand amid sluggish economic growth.
Analyst Insights: “Demand has been weaker over the summer than hoped for. Investors are anticipating a weak earnings season for refiners as margins continue to be squeezed, with crack spreads falling to very low levels,” noted Ashley Kelty, analyst at investment bank Panmure Liberum.
Middle East Tensions: Efforts to reach a ceasefire deal to end the war in Gaza between Israel and the militant group Hamas have gained momentum over the past month.
Canadian Wildfires: In Canada, hundreds of wildfires are burning in the western provinces of British Columbia and Alberta, including the oil sands hub Fort McMurray.