Investing.com-- Oil prices settled lower Friday, but notched a positive week following big gains earlier this week amid fading hopes of Gaza ceasefire and easing concerns about demand.
At 14:30 ET (18:30 GMT), West Texas Intermediate crude futures fell 1.3% to $78.26 a barrel, while Brent oil futures fell 1.3% to $84.79 barrel.
Oil heads for weekly gains
Both benchmark contracts were set to post gains of around 2% this week, boosted by stronger-than-expected overall import data from China, the world’s biggest oil importer. Signs of strong domestic demand pushed up hopes that oil demand will start picking up in the Asian giant.
China’s oil imports added to the positive overall tone as well, as although imports fell from the prior month, they came in above the levels seen last year.
Additionally, U.S. crude inventories surprisingly fell last week, and refining and fuel demand is set to increase tracking higher travel demand during summer.
"EIA data shows that U.S .commercial crude oil inventories fell by 1.36m barrels over the last week, different to the 500k barrel build the API reported," analysts at ING said, in a note.
"The decline in crude oil stocks was driven by stronger exports, which increased by 550kk b/d WoW to 4.47m b/d, and stronger refinery activity."
Baker Hughes rig count falls
The number of oil rigs operating in the U.S. fell by three to 496, the lowest since November, and well below the 586 seen at the same time last year.
Signs of slower drilling activity comes just days after the Energy Information Administration cut its U.S. oil production forecast for this year to 13.20 million barrels per day from a prior forecast of 13.21 million barrels per day.
Israel-Hamas ceasefire appears unlikely, tensions high
Israel has continued its assault on the South Gaza city of Rafah, even as Hamas said the assault largely undermined ceasefire talks.
The attacks persisted even as the U.S. said it will suspend weapon shipments to Israel over the Rafah strikes.
The Rafah strikes pointed to sustained geopolitical unrest, resulting a risk premium remaining alive in crude markets, given that geopolitical unrest in the Middle East could potentially disrupt supplies from the crude-rich region.
OPEC+ to roll over cuts?
Also supporting prices this week has been talk that the Organisation of Petroleum Exporting Countries. and allies, known as OPEC+, will continue to roll over output cuts, in an attempt to limit global supply.
"OPEC+ members will also become uncomfortable if Brent starts flirting with $80/bbl, a level which is not too far away," ING added.
"As we have mentioned previously, price weakness increases the likelihood that OPEC+ members will fully rollover their 2.2m b/d of additional voluntary cuts into the second half of the year, which risks overtightening the market later in 2024, assuming no downside surprises on the demand side."
(Peter Nurse, Ambar Warrick contributed to this article.)