Crude Oil Prices Rise on Rate Cut Hopes, Alberta Wildfires, and Middle East TensionsCrude Oil Prices Rise on Rate Cut Hopes, Alberta Wildfires, and Middle East Tensions Crude oil prices began the week with a gain, bouncing back from two consecutive weekly losses. This rise was primarily attributed to hopes of a rate cut by the Federal Reserve (Fed). Biden Ends Bid for Second Term President Joe Biden announced that he will not seek a second term, and instead endorsed Vice President Kamala Harris for the Democratic Party nomination. According to a Bloomberg report, if elected, Harris would be stricter on the oil industry than Biden. Alberta Wildfires Impact Production Wildfires in Alberta have put close to 350,000 bpd of production capacity at risk, further supporting oil prices. Middle East Conflict Escalates The Middle Eastern conflict escalated over the weekend, as Israel struck targets in Yemen in response to drone attacks. The targets included an oil storage facility and a power plant. Yemen’s Houthis have vowed retaliation. Chinese Demand Concerns Linger Despite Beijing releasing a policy update, concerns about Chinese demand remain, as the update did not offer significant changes to the current course of the government. Analysis Analysts at ANZ believe that recent inflation and labor market data suggest that the Fed may begin an interest rate cutting cycle in September, which would support oil prices. They also highlighted that wildfires in Alberta and the escalation of the Middle East conflict have further contributed to the rally. Summary Crude oil prices rose this week due to rate cut hopes, supply concerns arising from Alberta wildfires, and ongoing tensions in the Middle East. However, lingering worries about Chinese demand remain a potential bearish factor.
Crude oil prices started trading with a gain this week on hopes of a rate cut, bouncing back after posting a second consecutive weekly loss on Friday. The biggest news to start the week however is President Joe Biden’s announcement that he will end his bid for a second term.
“Today I want to offer my full support and endorsement for Kamala to be the nominee of our party this year. Democrats – it’s time to come together and beat Trump. Let’s do this,” Biden said on X.
According to a Bloomberg report, Harris-if nominated and if elected-would be tougher on the oil industry than Biden was, with the publication noting Harris’ track record as California attorney general who sued Big Oil. She has also declared she was in favor of banning fracking.
The full effect of Biden’s announcement, however, should become more palpable later in the day. For now, it’s rate hopes that are fueling higher prices.
“Since the June FOMC meeting, inflation and labor market data have signaled that disinflation and labor market rebalancing are in place, which we expect will allow the Fed to begin its interest rate cutting cycle in September,” ANZ analysts said, as quoted by Reuters .
Wildfires in Alberta have also helped oil move higher today, with close to 350,000 bpd in production capacity at risk, according to the Alberta Energy Regulator and Alberta Wildfire, as cited by Bloomberg.
The Middle Eastern war’s latest round of escalation also contributed to the rally, with the prospect of peace moving further in the distance yet again. Over the weekend, Israel struck targets in Yemen in response to a drone attacks, with the targets including an oil storage facility and a power plant. Yemen’s Houthis vowed retaliation.
On the bearish side, concern about Chinese demand remains considerable, even after Beijing released a long-awaited policy update that involved no significant changes from the current course followed by the government of the world’s largest oil importer.
By Irina Slav for Oilprice.com
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