Oil prices rose on July 18 as the U.S. dollar weakened and after President Joe Biden ended his trip to Saudi Arabia, failing to secure a commitment from the Middle Eastern country of increase crude production.
Brent futures for September settlement rose $4.53, or about 4.5%, to $105.70 a barrel as of 4 p.m. EDT on July 18, after gaining 2.1 % the 15th of July.
U.S. West Texas Intermediate (WTI) crude futures for August delivery gained $4.53, or about 4.7%, to $102.10 a barrel, after climbing 1.9% in the previous session.
Last week, Brent and WTI posted their biggest weekly declines in about a month as recession fears rattled market sentiment.
Still, oil supplies remained tight and the US dollar eased from recent highs, both factors supporting crude prices.
The greenback weakened on July 18 after hitting multi-decade highs against a basket of peer currencies last week. The DXY dollar index touched near 109 on July 14, before slipping to 107.45 at 4 p.m. EDT on July 18.
A weaker dollar tends to support the prices of oil and other dollar-denominated commodities, as it makes them a more attractive purchase for holders of other currencies.
Some analysts have said the July 19 oil rally is unlikely to last, with high inflation keeping pressure on central banks to keep tightening even in the face of growing signals of an economic slowdown.
“The bear market bounce” is how Keith McCullough, CEO of investment research firm Hedgeye, described the moves in crude, in a post on Twitter.
Buoyed by a weaker greenback, other commodities rose, notably wheat and copper. A key industrial input, copper is seen by many analysts as the barometer of a recession.
“Another good example of a free fall market rebounding this morning,” McCullough said copper price action, which rose more than 3% on Monday morning after falling 8.2% last week.
Wheat futures on the Chicago Stock Exchange rose 1.6% on July 18, recovering from their lowest in about five months.
Relief rallies are common in bear markets, experts say.
Biden in Saudi Arabia
The July 18 moves in the price of oil and other commodities follow Biden’s visit to Saudi Arabia, which ended without a commitment from the Kingdom to increase oil supplies. Biden has called on Saudi Arabia and other Gulf oil producers to increase oil production in a bid to calm high gasoline prices and, more broadly, inflation.
US inflation, as measured by the consumer price index, accelerated in June to a new 40-year high of 9.1%.
Despite the rally in a number of commodities, they have trended lower in recent weeks, suggesting that inflationary pressures may be easing.
Gasoline prices have fallen in recent weeks, with GasBuddy analyst Patrick De Haan saying in a July 17 statement that the most common gasoline price in the United States was $3.99 per gallon. The median gas price was $4.39 per gallon nationwide, while the top 10% of locations averaged $5.71, De Haan added.
Despite Saudi Arabia’s lack of a promise to increase production, Biden administration officials have held out hope for a little more relief on the supply side.
Amos Hochstein, the State Department’s senior energy security adviser, said July 17 on CBS’ “Face the Nation” that following Biden’s trip, several Gulf oil producers would take “a few more steps.” to increase production, although he did not. say which countries and by how much.
But ING analysts said in a note that the Biden administration’s view that Middle Eastern producers would ramp up production looks rosy and “comments from Saudi Arabia were less optimistic.”
“The Saudis said any production changes would be made within the broader framework of OPEC+, and that the group would monitor the market and react if necessary,” they wrote, adding that with the exception of the Saudi Arabia and United Arab Emirates. , there is “little available capacity”.
Markets will be watching the Aug. 3 OPEC+ meeting closely for supply signals as the cartel’s current production pact expires in September.
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