Oil prices steady after China-inspired weakness; OPEC+ in tricky place

Oil prices steadied Wednesday, with traders digesting progress towards an Israel-Hamas ceasefire as well as continued concerns over demand growth in China, the world's largest importer..

At 09:00 ET (13:00 GMT), Brent oil futures gained 0.5% to $77.57 a barrel, while West Texas Intermediate crude futures rose 0.5% to $73.52 a barrel.  Israel agrees to preliminary ceasefire deal 

Media reports earlier this week indicated Israel had agreed to a preliminary ceasefire deal brought on by the U.S., although the details of the agreement were still to be negotiated.

But Hamas was reported to be critical of the new deal, and that it reflected an American bias towards Israel. Hamas also issued a statement criticizing U.S. President Joe Biden. 

Hamas’ comments came as Israel continued its offensive against Gaza, which further complicated the prospect of a ceasefire. 

The Israel-Hamas war has been a key point of contention for oil markets, amid persistent concerns that a spillover in the conflict could disrupt oil supplies in the Middle East.

U.S. Secretary of State Antony Blinken was seen shuttling between Egypt, Qatar and Israel earlier this week to broker a ceasefire. But no deal appeared to be reached so far.  OPEC+ in "difficult situation" - ING

Crude prices have suffered steep losses in recent sessions on persistent concerns over slowing demand in top importer China.

Since peaking above $82 on Monday last week, Brent had shed 6.2% of its value by the end of trading on Tuesday, while the Nymex contract has dropped 7.5% in the same period.

"While weaker Chinese demand has been well reported, refinery margins around the globe have been under pressure for much of August, suggesting that these demand concerns are not isolated to just China," said analysts at ING, in a note.

"The weakness in the oil market leaves OPEC+ in a difficult situation," ING added.

"Currently, they are set to start gradually unwinding supply cuts from October. However, the negative sentiment in the market may make the group think twice about sticking to this plan. Unfortunately for OPEC+, the global oil balance is set to be looser next year, suggesting that plans to ease cuts through 2025 may also have to be revisited." US inventories see small build - API 

Data from the American Petroleum Institute showed that U.S. inventories grew nearly 0.4 million barrels in the week to Aug. 16, against expectations for a draw of 2.8 million barrels.

The API data usually heralds a similar reading from official inventory data , which is due later on Wednesday, and spurred some concerns that U.S. demand was cooling as the travel-heavy summer season came to a close. 

Data from the Energy Information Administration showed U.S. inventories grew for the first time in nine weeks earlier in August, with smaller draws in gasoline and distillate inventories furthering the notion that demand was cooling. 

U.S. oil production recently hit record highs, furthering concerns of oversupplied oil markets. 

(Ambar Warrick contributed to this article.)

Source: Investing.com