Brent moves lower as Gaza ceasefire talks progress

The front-month ICE Brent contract lost $0.92/bbl on the day, to trade at $81.63/bbl at 09.00 GMT.

PHOTO: Oil barrels and pump jacks at dusk. Getty Images

Upward pressure:

Crude oil inventories in the US dropped by 3.9 million bbls in the week that ended 19 July, according to estimates from the American Petroleum Institute (API). The API's estimate of a crude stock drawdown has lent some support to Brent.

A draw in US crude stocks indicates oil demand growth and could push oil prices higher. The US trade body reported “sizeable across-the-board oil inventory draws,” VANDA Insights’ founder and analyst Vandana Hari said.

Oil supply risks from wildfires in Canada's Alberta province have continued to exert upward pressure on Brent’s price, according to market analysts. Oil producers, including Suncor Energy and Altair Energy, have halted production due to operational disruptions caused by wildfires, Bloomberg reported.

“While wildfires have already forced some producers to curtail production, these fires still threaten a large amount of supply,” two analysts from ING Bank said.

The oil market will closely monitor Saudi Arabia-led OPEC's upcoming meeting on 1 August, as the organisation is expected to discuss strategies to increase prices, according to reports.

Downward pressure:

A weak economic outlook in China has raised concerns about oil demand growth in the country. This has contributed to pull Brent's price lower, according to analysts.

China reported its “weakest economic growth in five quarters last week, putting a damper on the outlook [for oil], ANZ Bank’s senior commodity strategist Daniel Hynes remarked.

Economic activity in the world’s second-largest oil consumer declined in the second quarter. China's GDP growth dropped from 5.3% in the first quarter to 4.7% in the second quarter.

Ceasefire talks between Israel and Hamas have shown progress after Israeli Prime Minister Benjamin Netanyahu signaled that a deal could be cracked to end the nine-month-old conflict in the Gaza Strip.

Netanyahu is currently visiting Washington, where he will address the US Congress, the Associated Press (AP) reports. The US, along with Egypt and Qatar, are proactively endorsing a phase-out plan that would stop Israel’s military operations in Gaza and free the remaining Israeli hostages. This could ease concerns over supply disruptions in the Middle East.

“Brent crude fell… hitting its lowest levels in over a month due to renewed Israel-Hamas ceasefire talks and demand concerns,” analysts from Saxo Bank said.

By Aparupa Mazumder

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