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Oil Holds its Ground as Chinese Demand Concerns Weigh

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
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Oil Holds its Ground as Chinese Demand Concerns Weigh

FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)
FILE - Pump jacks extract oil from beneath the ground in North Dakota, May 19, 2021. (AP Photo/Matthew Brown, File)

Oil held its ground on Monday as downward pressure from concern about demand in top importer China offset support from strong demand elsewhere, OPEC+ supply restraint and geopolitical tensions in the Middle East.

The reaction of the wider markets to the attempted assassination of former US President Donald Trump was in focus. The US dollar steadied after gains earlier in the session that had weighed on oil, Reuters reported.

Brent crude futures were up 3 cents at $85.06 a barrel by 1326 GMT. US West Texas Intermediate crude gained 7 cents to $82.28.

"Chinese data including refinery runs and crude imports are not supportive," said UBS analyst Giovanni Staunovo. "But demand growth elsewhere is still healthy."

Crude fell last week after four weeks of gains as hopes of strong US summer demand were countered by concern over demand in China.

Chinese data on Monday added to that concern. The world's second-largest economy grew by 4.7% in the April to June quarter, official figures showed, the slowest growth since the first quarter of 2023.

On Friday separate figures showed China's crude oil imports fell 2.3% in the first half of this year.

However, the volatile situation in the Middle East continues to provide a geopolitical premium for oil, though ample spare capacity held by Saudi Arabia and other members of OPEC has limited price support, analysts say.

"Geopolitical tensions in the Middle East, including volatile Israel-Hamas clashes and stalled peace talks, could remain a driving factor for oil prices due to concerns over regional stability," said George Pavel, general manager at Capex.com Middle East.

The oil market is also broadly underpinned by supply cuts from the OPEC+ group of producers. Iraq's oil ministry said at the weekend that it will compensate for overproduction since the beginning of 2024.

Market sentiment was supported by a US inflation report for June that came in below expectations, raising hopes for an interest rate reduction, though challenges persisted as China’s crude imports in June declined, highlighting ongoing market difficulties, Pavel added.

Federal Reserve Chair Jerome Powell is due to speak later in the day, and is likely to be asked for his reaction to last week's subdued inflation reading.

Markets are pricing in a 96% chance the Fed will cut rates in September, up from 72% a week earlier.

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BP Nears Deals for Oil Fields, Curbs on Gas Flaring in Iraq

British Prime Minster Keir Starmer (L) welcomes Prime Minister of Iraq Mohammed Shia al-Sudani to 10 Downing Street in London, Britain, 14 January 2025. (EPA)
British Prime Minster Keir Starmer (L) welcomes Prime Minister of Iraq Mohammed Shia al-Sudani to 10 Downing Street in London, Britain, 14 January 2025. (EPA)
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BP Nears Deals for Oil Fields, Curbs on Gas Flaring in Iraq

British Prime Minster Keir Starmer (L) welcomes Prime Minister of Iraq Mohammed Shia al-Sudani to 10 Downing Street in London, Britain, 14 January 2025. (EPA)
British Prime Minster Keir Starmer (L) welcomes Prime Minister of Iraq Mohammed Shia al-Sudani to 10 Downing Street in London, Britain, 14 January 2025. (EPA)

Iraq and British oil giant BP are set to finalize a deal by early February to develop four oil fields in Kirkuk and curb gas flaring, Iraqi authorities announced Wednesday.

The mega-project in northern Iraq will include plans to recover flared gas to boost the country's electricity production, they said.

Gas flaring refers to the polluting practice of burning off excess gas during oil drilling. It is cheaper than capturing the associated gas.

The Iraqi government and BP signed a new memorandum of understanding in London late Tuesday, as Prime Minister Mohammed Shia al-Sudani and other senior ministers visit Britain to seal various trade and investment deals.

"The objective is to enhance production and achieve optimal targeted rates of oil and gas output," Sudani's office said in a statement.

Iraq's Oil Minister Hayan Abdel Ghani told AFP after the new accord was signed that the project would increase the four oil fields' production to up to 500,000 barrels per day from about 350,000 bpd.

"The agreement commits both parties to sign a contract in the first week of February," he said.

Ghani noted the project will also target gas flaring.

Iraq has the third highest global rate of gas flaring, after Russia and Iran, having flared about 18 billion cubic meters of gas in 2023, according to the World Bank.

The Iraqi government has made eliminating the practice one of its priorities, with plans to curb 80 percent of flared gas by 2026 and to eliminate releases by 2028.

"It's not just a question of investing and increasing oil production... but also gas exploitation. We can no longer tolerate gas flaring, whatever the quantity," Ghani added.

"We need this gas, which Iraq currently imports from neighboring Iran. The government is making serious efforts to put an end to these imports."

Iraq is ultra-dependent on Iranian gas, which covers almost a third of Iraq's energy needs.

However, Teheran regularly cuts off its supply, exacerbating the power shortages that punctuate the daily lives of 45 million Iraqis.

BP is one of the biggest foreign players in Iraq's oil sector, with a history of producing oil in the country dating back to the 1920s when it was still under British mandate.

According to the World Bank, Iraq has 145 billion barrels of proven oil reserves -- among the largest in the world -- amounting to 96 years' worth of production at the current rate.