Oil falls 2% on Gaza ceasefire talks and weak Chinese economy

By Laila Kearney

NEW YORK (Reuters) -Oil prices fell by about 2% Monday, and global benchmark Brent held below $80 a barrel, on the prospect successful Middle Eastern peace talks could reduce supply risks, while leading oil importer China's economic weakness looked set to curb demand.

Brent crude futures dropped $1.59, or 2%, to $78.09 a barrel by 12:34 p.m. EDT (1634 GMT). U.S. West Texas Intermediate crude (WTI) futures were $1.71 lower, or 2.2%, at $74.94.

"This market is under pressure under expectations that they're going to continue to hammer away at the ceasefire talks," said Bob Yawger, director of energy futures at Mizuho in New York.

U.S. Secretary of State Antony Blinken on Monday said the latest diplomatic push by Washington to achieve a ceasefire deal in Gaza was "probably the best, maybe the last opportunity" and implored all stakeholders to get the agreement over the finish line.

Netanyahu's office said the prime minister "reiterated Israel's commitment to the latest American proposal regarding the release of our hostages - taking into account Israel's security needs."

China's economic problems also pressured oil prices, with data last week showing new home prices falling at the fastest pace in nine years. Chinese refineries sharply cut crude processing rates last month in response to weak fuel demand.

"We currently see long-term trends in global oil demand tilting lower with a much softer than expected Chinese economic recovery providing primary impetus in this regard," said Jim Ritterbusch of Ritterbusch and Associates in Florida.

Both crude benchmarks fell nearly 2% on Friday as investors tempered their Chinese demand growth expectations, but ended the week largely unchanged after U.S. data showed inflation was moderating despite robust retail spending.

"Persistent concerns about slow demand in China led to a sell-off," said Hiroyuki Kikukawa, president of NS Trading, adding that the approaching end of peak driving season in the United States was another factor weighing on prices.

However, supply risks from continued tensions in the Middle East and escalation of the Russian-Ukraine war are underpinning the market, he said.

Energy investors also awaited clues on the U.S. Federal Reserve's next interest rates decision.



A slim majority of economists polled by Reuters said they expected that the Fed would cut interest rates by 25 basis points at each of the remaining three meetings this year, one more reduction than predicted last month, and that a recession was unlikely.

Rate cuts could stir economic activity in the world's top oil-consuming country.

Source: Investing.com