Oil prices rose slightly in response to fears of an expansion of the conflict in the Middle East. However, signs of weakening demand in China limited gains.
Last week, Brent crude oil fell 1.8% and WTI fell 3.7% amid concerns about the state of the economy of China, the world's largest importer of crude oil, and hopes for a ceasefire agreement in the Gaza Strip.
Meanwhile, yesterday, the Israeli Security Cabinet authorized the Prime Minister's government to decide on the "method and timing" of responding to Saturday's rocket attack on the Golan Heights, which killed 12 teenagers and children. It was the deadliest attack in Israel or in the Israeli-annexed territory since the start of the war in the Gaza Strip (October 7). This conflict has spread on several fronts and risks escalating into a broader regional conflict.
Over the past few weeks, hopes for a ceasefire in Gaza have been gaining momentum. But, according to sources, Israel wants changes to the Gaza truce plan and the release of hostages, which complicates the deal to end hostilities.
On the demand side, recently released data showed that in the first six months of 20224, China's fuel oil imports fell by 11% per annum, raising concerns about the broader demand outlook in a country, where economic growth slowed in the second quarter, while domestic consumer demand was sluggish.
The next catalysts for the oil market will be the Fed meeting and data on China's PMI indices, which will help clarify the prospects for demand. Economists expect the manufacturing PMI to drop to 49.3 in July from 49.5 in June, while the non-manufacturing PMI fell to 50.2 from 50.5.