Crude oil prices started the week on a positive note, buoyed by expectations of a forthcoming interest rate cut, following consecutive weekly losses. The market also reacted to President Joe Biden’s announcement that he will not seek a second term, throwing his support behind Vice President Kamala Harris for the Democratic nomination.
In his statement on X, Biden endorsed Harris, emphasizing unity within the Democratic Party to challenge Trump in the upcoming election. Analysts from Bloomberg highlighted Harris’ potentially tougher stance on the oil industry compared to Biden, citing her past actions as California’s attorney general, including lawsuits against major oil companies and advocating for a fracking ban.
The immediate impact of Biden’s decision is expected to unfold throughout the day, but currently, optimism around potential rate cuts is the primary driver pushing oil prices higher.
“Since the June FOMC meeting, economic indicators such as inflation and labor market data have pointed towards stabilization, which we believe will prompt the Fed to initiate interest rate reductions starting in September,” noted analysts from ANZ.
Additionally, wildfires in Alberta posed a threat to oil production, jeopardizing approximately 350,000 barrels per day. Escalations in the Middle East conflict also contributed to the upward momentum, as Israel responded to drone attacks from Yemen over the weekend, targeting oil facilities and a power plant. Yemen’s Houthis have vowed retaliation.
On the downside, concerns linger over Chinese demand, despite Beijing’s recent policy update that showed no significant deviations from current economic strategies.
The combination of these factors underscores the volatile landscape influencing global oil markets at the outset of this trading week.
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