Oil prices fell another 4.2% on lower demand from China and hopes of a truce between Israel and Hamas

The US administration is making every effort to reach a truce between Israel and Hamas before the presidential election, as this will boost the approval ratings of Democrats and reduce oil prices, which remain high due to possible escalation in the Middle East.

On Monday, US Secretary of State Anthony Blinken met with Israeli Prime Minister Netanyahu, who confirmed that Israel accepts the US proposal for a cease-fire in Gaza and calls on Hamas to do the same.

Hamas is currently holding more than 112 hostages captured on October 7, 2023, but it is not known if all of them are still alive. The new leader of Hamas, Yahya Sinwar, is hiding in the tunnels under Gaza, so it is difficult for him to communicate with the outside world, as his predecessor, who lived in Qatar and was recently killed by Israel in Tehran, did. Sinvar himself spent 22 years in an Israeli prison, in 2008 Israeli doctors removed his brain tumor, which saved his life, and in 2011 he was exchanged for an Israeli soldier. There are rumors that now his illness has worsened again, so contacts with intermediaries are extremely limited.

During the week, Brent oil futures for October fell 4.2% to $77.2/barrel (-5.6% for the month) amid reduced speculative demand after Iran's decision not to respond with an open attack by Israel to kill the leader of Hamas in Tehrani.

Prices are also being pressured by declining energy demand in China, the world's second-largest consumer of crude oil. In July, steel production in the country fell by 9% compared to the corresponding figure in 2023 to the lowest figure this year of 82.94 million tons, which indicates low industrial and construction demand, i.e. a slowdown in the economy.

According to the country's Main Customs Administration, in July China reduced oil imports from the Russian Federation to the lowest level since September 2022 of 1.76 million barrels/day due to problems with oil payments between countries due to the threat of secondary US sanctions against Chinese companies. At the same time, China increased oil imports from Saudi Arabia by 13% to 1.51 million barrels/day and from Malaysia (which transports oil from Iran and Venezuela under sanctions) by 61% to 1.46 million barrels/day.

China is the largest buyer of Russian oil, so the decrease in its supplies already in July reduced Russia's income from oil exports to 656 million euros per day, which became an annual minimum.

Further declines in oil prices will increase pressure on biofuel prices and, accordingly, on the prices of vegetable oils and oilseeds.