HOUSTON: Brent and U.S. oil crude futures fell more than $2 a barrel on Friday on declining Chinese demand and hopes of a Gaza ceasefire agreement that could ease Middle East tensions and accompanying supply concerns.

Brent was down $1.81, or 2.2%, at $80.56 a barrel at 9:56 a.m. CDT (1456 GMT). West Texas Intermediate was down $1.84, or 2.36%, at $76.44 a barrel.

U.S. refiners are also preparing to cut back production as the end of the summer driving season in early September nears.

The nation’s second largest refiner, Valero Energy Corp , said on Thursday its 14 refineries would run at 92% of combined capacity in the third quarter. Valero’s refineries ran at 94% in the second quarter.

For the week, Brent is trading down over 1% while WTI is down more than 2%.

Oil edges up on upbeat US economic data

Recent data, such as July 20 figures showing that China’s total fuel oil imports dropped 11% in the first half of 2024, have raised concern about the wider demand outlook in China.

“Yesterday’s better-than-expected U.S. GDP growth figures initially supported the crude market,” said George Khoury, global head of education and research at CFI. “However, these gains were overshadowed by concerns about declining Chinese oil demand.”

In the Middle East, hopes of a ceasefire in Gaza have been gaining momentum.

A ceasefire has been the subject of negotiations for months, but U.S. officials believe the parties are closer than ever to an agreement for a six-week ceasefire in exchange for the release by Hamas of female, sick, elderly and wounded hostages.

Oil price declines were capped, however, by threats to production from Canadian wildfires, a large U.S. crude stocks draw and continued hopes of a September cut to U.S. interest rates after strong economic data, said PVM oil analyst Tamas Varga.