Oil Prices Increase Amid Political Uncertainty
The price of oil rose on Monday, driven by political uncertainty in the US and the Middle East. This increase offset the pressure from a stronger dollar and weak demand in the largest importer of “black gold” – China, according to Reuters.
Brent crude oil futures rose by 15 cents, or 0.2%, to $85.18 a barrel, after falling by 37 cents on Friday.
Oil Prices Rise Following Dollar Strength
The harsh West Texas Intermediate (WTI) crude oil is trading at $82.41 per barrel – up by 20 cents, or 0.2%.
The price of oil has shrugged off the influence of the dollar, which strengthened following the attack on US presidential candidate Donald Trump.
“I don’t think we can ignore the uncertainty that the assassination attempt over the weekend will cast on a deeply divided country on the eve of elections,” said IG market analyst Tony Sycamore.
In the Middle East, negotiations to end the conflict in Gaza between Israel and Hamas have been paused.
Geopolitical Tensions Impact Oil Market
Three days after the discussions, despite an official representative of Hamas stating that the group had not withdrawn from the talks, tensions escalated on Saturday with an Israeli attack targeting the military leader of the organization, resulting in the deaths of 90 people. The uncertainty has kept the geopolitical premium on “black gold” elevated.
The oil markets are also supported by supply cuts from OPEC+, with the Iraqi Ministry of Oil announcing plans to compensate for any overproduction starting from early 2024 onwards.
Oil prices fluctuate due to decreased demand in China
Last week, Brent crude oil prices fell by more than 1.7% after four weeks of growth, while WTI futures declined by 1.1% as the decrease in crude oil imports in China countered the high demand during the summer in the US.
“Although the fundamental factors are still favorable, there are increasing concerns about demand, largely coming from Beijing,” analysts at ING, led by Warren Patterson, pointed out.
Crude oil imports in China dropped by 2.3% in the first half of this year, leading to uncertainties in the global oil market.
Oil production decreases due to low demand
Oil production decreased by 11.05 million barrels per day due to disappointing fuel demand and independent refineries reducing production because of low profit margins.
China’s economy slows down
China’s economy slowed down in the second quarter as the prolonged decline in the real estate sector and labor market issues weighed on domestic demand. This has raised expectations that Beijing will need to implement more stimulus measures for its economy.
Decline in active oil platforms in the US
In the US, the number of active oil platforms, an early indicator of future production, decreased.
Oil Rig Count Hits Lowest Level Since December 2021
The number of oil rigs in operation worldwide dropped to as low as 478 last week, according to energy services company Baker Hughes. This marks the lowest level since December 2021.
The data was reported at 9:00 AM local Bulgarian time.
