(Bloomberg) -- Oil pushed higher after a two-day drop as jitters surrounding a potential Iranian attack on Israel and a strong US economic reading overshadowed persistent demand fears.
West Texas Intermediate soared by over a dollar to settle above $78 a barrel after falling more than 3% over the previous two sessions. White House spokesman John Kirby told reporters that he doesn’t expect newly initiated Gaza cease-fire talks to reach a deal on Thursday. Crude’s advance was also aided by gains in equities, after the latest reading on US retail sales underscored the strength of the world’s largest economy.
Traders are largely focused on whether Iran will retaliate against Israel for the killing of a senior Hamas leader on its soil. Israel today began talks with international mediators about a proposed deal to pause the more than 10-month-old war in Gaza, but slow progress left crude’s risk premium intact.
In China, apparent oil demand fell 8% from a year ago in July, government data showed, exacerbating the downbeat mood in Asia’s biggest economy. Earlier this week, figures from the US Energy Information Administration showed an increase for the nation’s crude stockpiles. That was partially offset by WTI’s prompt-spread strengthening to $1.18, meaning traders perceive supply to be tight as inventories at the vital storage hub in Cushing, Oklahoma, continue to slide.
As the summer driving season winds down in the Northern Hemisphere, demand for oil typically weakens. But steep seasonal declines sometimes see the commodity rallying back, this time “with Middle East tensions serving as a catalyst,” said Jay Hatfield, chief executive officer of Infrastructure Capital Advisors. “And then, the momentum trade kicks in.”
Crude has slipped 7.5% from its high last month, weighed down by a poor outlook for consumption in China, with gasoline demand in the Asian nation dragged down by growing use of cleaner fuels.
To get Bloomberg’s Energy Daily newsletter into your inbox, click here.
--With assistance from Alex Longley and Yongchang Chin.
