By Scott DiSavino
NEW YORK (Reuters) -Oil prices slid about 1% to settle at a seven-week low on Tuesday as investors worried that demand from China could be weakening while OPEC+ seems likely to stick to plans to increase supplies.
Market participants have been talking for days about a possible ceasefire deal in Gaza that could reduce the geopolitical risk premium for crude prices.
Brent futures delivery fell $1.15, or 1.4%, to settle at $78.63. U.S. West Texas Intermediate (WTI) crude fell $1.08, or 1.4%, to $74.73.
That was the lowest close for both benchmarks since June 5 and kept both in technically oversold territory for a second day.
U.S. futures for diesel and gasoline also closed at their lowest since early June.
Manufacturing activity in China, the world's largest crude importer, likely shrank for a third month in July, according to a Reuters poll. Chinese leaders have vowed to step up support for the economy, but investors expect such measures will be limited since the Third Plenum policy meeting largely reiterated existing goals.
In Lebanon, an Israeli air strike targeted a senior Hezbollah commander in Beirut's southern suburbs in what the Israeli military called retaliation for a cross-border rocket attack over the weekend that killed 12 children and teenagers.
Some analysts have said Israel's measured response could signal a deal was close on Gaza.
A ceasefire deal with Hamas has "the potential to (remove) $4 to $7 (a barrel) of risk premium out of the market," Bob Yawger, director of energy futures at Mizuho, said in a note.
On Thursday, top ministers from OPEC+, the Organization of the Petroleum Exporting Countries (OPEC) and allies like Russia, will meet to review the market, including a plan to start unwinding some output cuts from October. No changes are currently expected.
U.S. INVENTORY DATA DUE
Weekly U.S. oil storage data is due from the American Petroleum Institute (API) trade group later on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday.
Analysts projected U.S. energy firms pulled about 1.1 million barrels of crude out of storage during the week ended July 26. [EIA/S] [API/S]
If correct, that would be the first time U.S. crude stocks declined for five weeks in a row since January 2022.
U.S. job openings fell modestly in June and data for the prior month was revised higher, suggesting the labor market continued to cool, which analysts say makes it more likely the Federal Reserve will reduce interest rates.
The Fed is expected hold its benchmark overnight interest rate steady at its July 30-31 meeting and signal that rate cuts may begin as soon as the central bank's September meeting.
The Fed hiked rates aggressively in 2022 and 2023 to tame a surge in inflation. Lower rates can boost economic growth and demand for oil.
The U.S. is considering fresh sanctions on OPEC member Venezuela following disputed results in the South American country's presidential election.
President Nicolas Maduro's victory in the latest Venezuelan election "is a headwind for global supply, as this could result in tighter U.S. sanctions," ANZ analysts said in a note, estimating such a scenario could cut Venezuela's exports by 100,000-120,000 barrels per day.