Oil prices eased in trading on Monday as fears of weaker demand in top oil importer China weighed on market sentiment while investors focused on the progress of ceasefire talks in the Middle East, which could reduce supply risks.
Brent crude futures dropped 45 cents, or 0.56%, to $79.23 per barrel by 0646 GMT. U.S. West Texas Intermediate crude futures slid 58 cents, or 0.76%, to $76.07 a barrel.
Both benchmarks fell nearly 2% last Friday as investors tempered expectations of demand growth from China, but ended the week largely unchanged from a week earlier after a batch of U.S. data last week showed inflation was moderating and retail spending was robust.
“Persistent concerns about slow demand in China led to a sell-off,” said Hiroyuki Kikukawa, president of NS Trading, a unit of Nissan Securities, adding another factor was the approaching end of the peak driving season in the United States.
“Still, tensions in the Middle East and the escalation of the Russian-Ukraine war, which pose supply risks, are underpinning the market,” he said.
Customs data over the weekend showed that China’s diesel and gasoline exports fell sharply in July, reflecting lower crude processing levels in the month because of weak profit margins.
On Thursday, data also showed China’s economy lost momentum in July, with new home prices falling at the fastest pace in nine years, industrial output slowing and unemployment rising.
That has stoked worries among traders about a slump in demand from China, where refineries sharply cut crude processing rates last month on tepid fuel demand.
Meanwhile, U.S. Secretary of State Antony Blinken arrived in Tel Aviv on Sunday on another Middle East tour to push for a ceasefire in Gaza, but Hamas raised doubts about the mission by accusing Israel of undermining his efforts.
The mediating countries – Qatar, the United States and Egypt – have so far failed to narrow enough differences to reach an agreement in months of on-off negotiations, and violence continued unabated in Gaza on Sunday.
(Reporting by Yuka Obayashi and Colleen Howe; Editing by Stephen Coates and Jacqueline Wong)