Oil prices saw a modest increase following a nearly 3% drop on Friday. This rebound comes as investors digest the implications of President Joe Biden’s decision to forgo a reelection bid and contend with the impact of wildfires on Canadian oil production.
Global benchmark Brent crude climbed above $83 per barrel, recovering from its largest single-day drop since early June. Similarly, West Texas Intermediate (WTI) approached $81 per barrel. Biden’s exit from the 2024 presidential race, attributed to concerns about his chances against former President Donald Trump, and his subsequent endorsement of Vice President Kamala Harris, have influenced market sentiments. Additionally, the US dollar’s decline in Asian trading has provided a boost to commodities priced in the currency.
In Canada, a heatwave in the Alberta oil region has intensified wildfires, jeopardizing an estimated 348,000 barrels per day of oil production, according to data from Alberta Wildfire and the Alberta Energy Regulator. This year’s oil market has been buoyed by OPEC+ production cuts, which have set the stage for a reduction in global stockpiles during the northern hemisphere summer.
Geopolitical tensions also remain a concern, with ongoing conflicts involving Israel and Iranian-backed groups, including the Houthis in Yemen, raising fears of potential supply disruptions. Over the weekend, Israel targeted the Houthi-controlled Red Sea port of Hodeidah in response to a drone attack on Tel Aviv. The Israeli airstrikes hit facilities, including fuel-storage sites, as shown by footage from Houthi media depicting significant damage.
Market indicators suggest tight short-term conditions. The prompt spread for Brent crude — the price difference between its two nearest contracts — was over $1 per barrel in backwardation, a bullish sign, compared to 76 cents two weeks ago.
Related topics:
