Crude oil across both major benchmarks, Brent and West Texas Intermediate (WTI), is trading sideways with some bullish bias of around 0.3%.
The crude moves come after overall lackluster Chinese economic figures also as markets await the outcomes of the “last-chance” Gaza ceasefire negotiations that could help ease tensions in the Middle East.
Today, we saw a series of data from China regarding various aspects of the economy for the month of July, which, in general, do not provide positive signals about the future of oil demand.
Industrial production slowed more sharply than expected, unemployment rose more than expected to 5.2%, while house prices continued to contract for the thirteenth consecutive month. In addition, thermal energy production decreased by 4.9% year-on-year, despite a 2.5% increase in electricity production overall. On the other hand, retail sales growth accelerated more than expected, at 2.7% on an annual basis.
Oil prices also fell yesterday despite an unexpected slowdown in inflation in the United States to below 3.0% in July for the first time since 2021.
Markets did not seem to be very welcoming of yesterday’s CPI reading, as it contributed to re-weighting the possibility of a 25-basis point cut in September instead of 50 points, according to the CME FedWatch Tool.
In other words, markets have reconsidered their pricing for an emergency interest rate cut and have toned down their overreaction to the shocking July jobs data, which may explain the negative response of oil prices.
In the Middle East, negotiations to be held in Qatar today to cease fire in Gaza could be one of the fateful turning points in the region.
The potential agreement would prevent further escalation that could ignite a full-scale regional war, which has prompted regional and international efforts to intensify, according to The New York Times. Meanwhile, we see doubts about the seriousness of the Israeli side in seeking to reach an agreement.
Axios quoted Israeli officials as saying that it is not clear whether the mandate granted to the negotiating delegation may be sufficient to reach an agreement, although it may provide space for serious negotiations.
Hamas, which refused to participate directly in new negotiations and stuck to what was previously proposed, also doubted Israel’s seriousness in negotiating and the ability or desire of the US to pressure to reach an agreement, according to The Associated Press, quoting a Hamas leader.
Meanwhile, Israeli Prime Minister Benjamin Netanyahu’s obstruction of the negotiation efforts comes in an attempt to prevent the far-right ministers from bringing down the government at the refuse to stop the war, according to CNN.
While today’s failure to achieve any significant breakthrough in the negotiations may keep the door open for further escalation on multiple fronts in the region. This will come with anticipation of Iran and Hezbollah’s response to the assassination of Ismail Haniyeh and Fouad Shukr.
