Oil prices fell by more than 1.6%, reaching a new 7-week low, after yesterday's moderate rise caused by US data on petroleum product inventories. Pressure on prices comes from mixed demand signals, a soft outlook for China’s economy, as well as investor flight from risk.
Yesterday, the U.S. Energy Information Administration (EIA) announced that crude inventories declined by 3.741 million barrels in the week ended July 19, following a tumble of 4.870 million barrels in the previous week. Overall, this was the fourth straight weekly draw in the U.S. crude inventories. Economists had forecast a drop of 2.050 million barrels. At the same time, gasoline stocks plunged by 5.572 million barrels, the most since the week ended March (-5.66 million barrels). Analysts had foreseen a slip of 0.900 million barrels. Elsewhere, distillate stocks dropped by 2.753 million barrels, recording the first decrease in three weeks, the pace of which was also the sharpest since the week ended April 12 (-2.76 million barrels). Analysts had forecast a build of 0.530 million barrels. Meanwhile, oil production in the U.S. held steady at 13.300 million barrels per day.
"Yesterday's price increase on the back of the EIA data was offset today, as concerns roared back to the economy, notably that of China. Markets cannot be if but a little concerned when the Central Bank of China delivered a second rate cut in one week to support activity," Onyx Capital Group experts said.
Meanwhile, official data showed that China's crude oil imports fell by 2.3% per annum in the first half of the year due to lower fuel demand amid sluggish economic growth.
As for the situation in the Middle East, efforts have intensified over the past month to reach a ceasefire agreement to end the war between Israel and militant group Hamas.