Oil prices declined on Monday following President Joe Biden’s announcement that he would not pursue a second term, while investors speculated about potential U.S. interest rate cuts as early as September.
By 1327 GMT, Brent crude futures had decreased by 68 cents, or 0.82%, to $81.95 per barrel. U.S. West Texas Intermediate crude futures dropped 69 cents to $79.44 per barrel.
Over the past month, Brent crude has remained relatively stable, fluctuating between $82 and $88 per barrel.
“The rupee remained flat at 83.66 as the dollar index declined slightly to 104$ from 104.11$. Crude prices also weakened, dropping to 78.49$ from 78.66$, supporting the rupee. The upcoming Union Budget tomorrow is expected to provide a strong outlook for the rupee, as it will outline India’s income and expenditure roadmap for the next year. The rupee remains range-bound between 83.25 and 83.80 broadly,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
What’s weighing on crude oil prices?
The U.S. Federal Reserve is scheduled to review its policy on July 30-31. Investors anticipate that the Fed will maintain current rates, although there are indications of a possible rate cut in September.
Higher interest rates increase borrowing costs for consumers and businesses, which can reduce oil demand.
In other news, President Biden’s decision on Sunday to abandon his re-election bid has not significantly impacted oil markets, according to analysts. He has endorsed Vice President Kamala Harris to run against Republican Donald Trump in the November election.
Meanwhile, China’s slower-than-expected economic growth of 4.7% in the second quarter raised concerns about the country’s oil demand and continues to pressure prices.
“Oil started July by attempting to break the downside resistance that has been forming on weekly timeframes since March 2022. Reversals from lower and lower levels are supported by a slowing global economy and stagnant demand. The only thing holding the price back from a real collapse is the fact that the oil supply has also been shrinking or stagnating in recent months. Oil at $77.7 is testing crucial support in the form of the 200-week moving average (now at $76.7) for the second time in eight weeks. Since the beginning of 2023, touches of this line have coincided with significant interventions by OPEC+ when the cartel reduced quotas or postponed their increase,” said Alex Kuptsikevich, the FxPro senior market analyst.
On Monday, China unexpectedly lowered a key short-term policy rate and benchmark lending rates to stimulate the economy, though analysts noted the support was limited.
Additionally, on Sunday, China released a policy document after a leaders’ meeting that reiterated known goals, such as developing advanced industries and improving the business environment.
