Oil prices remained stable on Monday, influenced by political uncertainties in the US and the Middle East, which supported prices despite the downward pressure from a stronger dollar and weak demand from China, the leading importer. Brent crude futures dipped by 13 cents, or 0.2%, to $84.90 per barrel by 0640 GMT, following a 37-cent decline on Friday. Meanwhile, US West Texas Intermediate crude was priced at $82.15 a barrel, down 6 cents, or 0.1%.
The dollar strengthened after a failed assassination attempt on US presidential candidate Donald Trump, which impacted oil prices as a stronger dollar makes oil more expensive for buyers using other currencies. IG market analyst Tony Sycamore noted the significant uncertainty the assassination attempt introduces in a deeply divided country approaching an election.
In the Middle East, efforts to end the Gaza conflict between Israel and Hamas paused on Saturday after three days of talks. A Hamas official stated that they had not withdrawn from discussions, although an Israeli attack on Saturday, targeting a Hamas military leader, resulted in 90 casualties. This volatile situation has maintained the geopolitical premium in oil prices.
Oil markets continue to be supported by OPEC+ supply cuts, with Iraq’s oil ministry committing to compensate for any overproduction since the beginning of 2024. Last week, Brent crude saw a decline of more than 1.7% after four consecutive weeks of gains, while WTI futures fell by 1.1%. This was due to a reduction in China’s crude imports, which counterbalanced strong summer consumption in the United States.
ING analysts, led by Warren Patterson, noted growing concerns about demand, primarily originating from China. In the first half of the year, China’s crude oil imports dropped by 2.3% to 11.05 million barrels per day due to weak fuel demand and reduced output from independent refiners facing low profit margins. June’s crude throughput at Chinese refineries fell by 3.7% from the previous year to 14.19 million barrels per day, marking the year’s lowest level so far.
China’s economy experienced a slowdown in the second quarter, driven by a prolonged property downturn and job insecurity, which dampened domestic demand. This situation has led to expectations that Beijing will need to introduce more economic stimulus measures. In the US, the active oil rig count, an early indicator of future output, decreased by one to 478 last week, reaching the lowest level since December 2021, according to energy services firm Baker Hughes.
The interplay of political uncertainties, economic indicators, and market dynamics continues to shape the landscape of oil prices, with key influences stemming from geopolitical events and shifts in major economies.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
