Oil prices fall on concerns about demand from China; focus on Middle East talks

By Yuka Obayashi

TOKYO (Reuters) – Oil prices fell in early Asian trade on Monday as concerns about weaker demand from top oil importer China weighed on market sentiment, while investors looked to progress in Middle East ceasefire talks that could reduce supply risks.

Brent crude futures fell 13 cents, or 0.2%, to $79.55 a barrel by 00:32 GMT. U.S. West Texas Intermediate crude futures slipped 13 cents, or 0.2%, to $76.52 a barrel.

Both benchmarks fell nearly 2% last Friday as investors tempered expectations for demand growth from China, but they ended the week largely unchanged from the previous week after a series of U.S. data last week showed moderating inflation and robust retail sales.

“Persistent concerns about weak demand in China led to a sell-off,” said Hiroyuki Kikukawa, president of NS Trading, a subsidiary of Nissan Securities, adding that another factor was the approaching end of rush hour in the United States.

“Nevertheless, tensions in the Middle East and the escalation of the war between Russia and Ukraine, which pose supply risks, are supporting the market,” he said.

Data from China released on Thursday showed that the Chinese economy lost momentum in July. New home prices fell at the fastest pace in nine years, industrial production slowed and unemployment rose.

This has fuelled concerns among traders about a collapse in demand in China, where refineries drastically cut their crude processing rates last month due to weak demand for fuel.

Meanwhile, US Secretary of State Antony Blinken arrived in Tel Aviv on Sunday as part of another Middle East tour to push for a ceasefire in Gaza, but Hamas raised doubts about the mission by accusing Israel of undermining its efforts.

The mediating countries Qatar, the United States and Egypt have so far failed to resolve their differences sufficiently to reach an agreement in months of irregular negotiations. And the violence in Gaza continued unabated on Sunday.

(Reporting by Yuka Obayashi; Editing by Stephen Coates)