By Noah Browning

(Reuters) -Oil prices fell on Thursday as demand signals from lacklustre Chinese consumption outweighed the previous day’s data showing large draws on U.S. inventories.

futures for September fell $1.01, or 1.2%, to $80.70 a barrel by 1117 GMT. U.S. West Texas Intermediate crude for September slid $1.2, or 1%, to $76.67.

Both benchmarks rose on Wednesday, snapping consecutive sessions of declines after the Energy Information Administration said inventories fell by more than expected to 3.7 million barrels last week. [EIA/S]

U.S. gasoline stocks dropped by 5.6 million barrels, against analyst expectations of a 400,000 draw.

“Despite draws in U.S. crude and gasoline stocks, investors remained wary about weakening demand in China and expectations of advancing ceasefire talks between Israel and Hamas added to pressure,” said Hiroyuki Kikukawa, president of NS Trading, owned by Nissan (OTC:) Securities.

China’s oil imports and refinery runs this year have trended lower than in 2023 on weaker fuel demand amid sluggish economic growth, government data shows.

“Growing concerns over the strength of oil demand in the short to medium term have acquired a strong grip on market sentiment,” said Vandana Hari, founder of oil market analysis provider Vanda (NASDAQ:) Insight.

In the Middle East, efforts to reach a ceasefire deal to end the war in Gaza between Israel and militant group Hamas have gained momentum over the past month. A breakthrough could erode lingering threats to supply and send prices lower.

The U.S. Federal Reserve, meanwhile, is expected to cut interest rates only twice this year, in September and December, according to a Reuters poll of economists, with resilient U.S. consumer demand prompting a cautious approach despite easing inflation.

Lower interest rates should spur economic growth, leading to more oil consumption.

In Canada, hundreds of wildfires are burning in the western provinces of British Columbia and Alberta, including in the area of oil sands hub Fort McMurray.