Investing.com — Oil prices fell to a weekly loss after declining on Friday, as new hopes for a ceasefire in Gaza and lingering demand concerns weighed on sentiment ahead of the meeting of key crude oil producers this weekend.
At 2:08 PM ET (18:08 GMT), the price was down 0.3% at $81.62 per barrel, while down 1.2% to $76.99 per barrel.
Hamas-Israel ceasefire back in the spotlight
Israel has agreed to an agreement that would lead to a “lasting” ceasefire in the Gaza Strip, US President Joe Biden said on Friday, referring to a proposal for a three-phase ceasefire.
The first phase, which will last six weeks, calls for a complete ceasefire and the withdrawal of Israeli forces from all populated areas of Gaza. The second phase aims to permanently end hostilities in Gaza as well as the withdrawal of Israeli forces from the area and would result in the release of all remaining living hostages in Gaza. The final phase of the deal, meanwhile, includes a reconstruction plan for Gaza.
However, it remains to be seen whether Hamas will accept the proposal.
The news eased tensions in the Middle East and helped further cool bets on an oil supply risk premium in the region.
China’s PMIs disappoint and heighten demand fears
Data from the Purchasing Managers’ Index showed on Friday that China’s manufacturing activity unexpectedly contracted in May, while non-manufacturing activity grew slower than expected.
The figures showed Chinese business activity was cooling after a brief rebound in the past two months, and growing concerns about sluggish demand from the world’s top oil importer.
The data also showed that Beijing’s massive stimulus measures had provided only limited support to the Chinese economy so far, and that more supportive measures were needed.
The number of drilling rigs at Baker Hughes is declining
The number of oil rigs operating in the U.S. fell from 497 to 496, according to data from energy services company Baker Hughes on Friday.
The drop in rig numbers comes as concerns about weaker demand resurfaced after data on Thursday showed weaker gasoline demand.
The US saw a bigger-than-expected draw in the week to May 24: almost 4.2 million barrels, compared to expectations of 1.6 mb.
But grew by 2MB, more than expected for a 1MB build, while growing 2.5MB against expectations for a 0.4MB build.
The expansion of product inventories raised concerns that demand from the world’s largest fuel consumer was sluggish during the busy summer season.
Dollar remains stable as inflation data meets expectations
The dollar was steady and did little to spark a bid for crude as the core personal consumer expenditures (PCE) price index, the Fed’s preferred gauge of inflation, rose 2.8% in April , unchanged from a month earlier, which was in line with investor expectations. .
Fears of prolonged high U.S. interest rates have been a major pressure on oil prices in recent sessions, amid growing concerns that high rates will hit economic activity in coming months, hampering oil demand.
OPEC+ meets this weekend
Also in the spotlight is an upcoming meeting of the Organization of the Petroleum Exporting Countries and allies, known as OPEC+, at which the cartel will discuss future production levels.
The group is currently cutting production by 5.86 million barrels per day, equivalent to about 5.7% of global demand.
The meeting will now take place live rather than virtually, increasing optimism that the group is likely to agree to an extension of production curbs.
OPEC+ is working on a complex deal to be agreed at Sunday’s meeting that would allow the group to extend some of its deep oil production cuts until 2025, Reuters reported, citing sources.
(Peter Nurse, Ambar Warrick contributed to this article.)
