Oil prices fell by over $2 on Friday, settling at their lowest level since mid-June. Investors were focused on the possibility of a ceasefire in Gaza, and a strengthened dollar further pressured prices downward.
The war in Gaza has led investors to price in a risk premium when trading oil, as tensions in Middle East and the Red Sea threaten global supplies.
Brent crude prices settled down $2.48, or 2.9%, to $82.63 a barrel. U.S. West Texas Intermediate crude futures dropped $2.69, or 3.3%, to $80.13 a barrel.
The strong US dollar this week had the greatest impact on the decline in oil prices. A strengthening dollar tends to drag oil prices down because it makes oil more expensive for holders of other currencies.
China’s economy grew by a slower than expected 4.7% in the second quarter, according to official data, raising concerns about its demand for oil. Retail sales in June were also weaker than anticipated.
Moreover, refinery output in the world’s top crude oil importer dropped by 3.7% in June compared to the same month last year. This decline was due to tepid fuel demand and weakening refining margins, prompting independent refiners to reduce crude processing rates.
Data from last week showed that China’s crude oil imports slumped by 11% in June compared to a record high in the same month of 2023, due to weak demand and refining margins.
In its monthly report last week, the International Energy Agency (IEA) stated that underwhelming Chinese consumption is slowing the growth of global oil demand.
Providing some support to prices, energy services firm Baker Hughes reported that the number of oil rigs fell by one to 477 this week, their lowest since December 2021.
A global tech outage disrupted operations across multiple industries, causing airlines to halt flights, some broadcasters to go off air, and affecting sectors ranging from banking to healthcare with system problems.
Two large oil tankers caught fire after colliding near Singapore.
Singapore, Asia’s biggest oil trading hub and the world’s largest bunkering port, is surrounded by vital trade waterways between Asia, Europe, and the Middle East. These waters are among the busiest global sea lanes.
The Joint Ministerial Monitoring Committee (JMMC), the OPEC+ panel overseeing the oil market, is not anticipated to recommend any changes to the group’s current production policy plan in August, OPEC+ delegates informed Bloomberg on Thursday.
The JMMC meeting is held every two months with the presence of OPEC+ member ministers to review the most recent market developments.
Crude oil inventories in the United States fell sharply by 4.44 million barrels for the week ending July 12, according to the American Petroleum Institute (API).
For the week prior, the API reported a 1.9 million barrel draw in crude inventories.
This week marks the third consecutive week of API-estimated inventory draws for crude oil, totaling a loss of 15.5 million barrels.
Russia will implement additional crude oil production cuts during the warmer seasons to compensate for exceeding its OPEC+ quota in previous months, according to sources familiar with the matter who spoke to Bloomberg. These cuts are planned for summer and early fall due to technological considerations, as Russia requires more oil for domestic use during the colder months.
The four week average level of Russia’s crude shipments fell to around 3.11 million barrels per day (bpd) in the four weeks to July 14, down by approximately 180,000 bpd from the previous four-week average, according to data reported by Bloomberg.