Oil prices maintained their stability on Monday, despite facing downward pressure from a stronger U.S. dollar and worries about demand in China, the world’s largest importer. The dollar strengthened as investors speculated that the recent attack on U.S. presidential candidate Donald Trump might increase his chances of winning the November election. A stronger dollar typically reduces the demand for dollar-priced oil.
By 0825 GMT, Brent crude futures had edged up by 1 cent to $85.04 a barrel, while U.S. West Texas Intermediate crude rose by 9 cents, or 0.1%, to $82.30. John Evans from oil broker PVM noted that markets might become more defensive in response to the attempted assassination of Trump, though there were no significant price movements in oil. He also mentioned that Monday’s Chinese economic growth data was disappointing.
Oil prices declined last week following a month of gains. This was due to mixed signals: strong U.S. summer demand prospects were overshadowed by concerns about Chinese demand. Chinese economic data released on Monday exacerbated these worries, revealing that the economy grew by 4.7% in the second quarter, the slowest rate since early 2023. Additionally, China’s crude oil imports dropped by 2.3% in the first half of the year.
Despite these concerns, geopolitical tensions in the Middle East continue to provide a premium for oil prices. However, analysts point out that ample spare capacity from Saudi Arabia and other OPEC members has kept prices from rising significantly. The oil market is also supported by supply cuts from the OPEC+ group of producers. Over the weekend, Iraq’s oil ministry announced plans to compensate for overproduction since early 2024.
ING analysts, led by Warren Patterson, commented that while oil market fundamentals remain supportive, there are increasing concerns about demand, primarily driven by the situation in China.
Oil prices are caught in a balance of opposing forces. A stronger U.S. dollar and disappointing Chinese economic data weigh on demand, while geopolitical uncertainties and OPEC+ supply cuts provide some support. The coming weeks will be crucial in determining the direction of oil prices as these factors continue to play out.
Union Jack Oil plc (LON:UJO) is an onshore oil and gas exploration company with a focus on drilling, development and investment opportunities in the United Kingdom hydrocarbon sector.
