Oil surges after Biden fails to win the pledge to pump Saudi Arabia’s crude oil

Oil prices rose as the US dollar softened on July 18 and President Joe Biden failed to secure a commitment from Middle Eastern countries to increase oil production after finishing his trip to Saudi Arabia.

Brent crude oil futures settled in September rose $ 2.42 (2.4%) to $ 103.58 a barrel by 5:30 am New York time on July 18, after rising 2.1% on Friday.

US West Texas Intermediate (WTI) crude oil futures delivered in August rose $ 2.04 (2.09%) to $ 99.64 a barrel after rising 1.9% in the previous session.

Last week, both Brent and WTI recorded the largest weekly decline in about a month, as the recession feared a decline in market sentiment.

Still, oil supplies remain tight, the US dollar has eased recent highs, and both factors are supporting oil prices.

Monday’s greenback weakened after hitting a basket of currencies last week for the first time in decades. The DXY dollar index reached near 109 on July 14th and fell to 107.3. By 6:36 am New York time on July 18th.

A weaker dollar tends to support oil prices and other dollar-denominated commodities as it makes purchases more attractive to holders of other currencies.

Some analysts said Monday’s oil rally is unlikely to continue. High inflation continues to put pressure on central banks to continue tightening, despite rising signs of recession.

Keith McCullough, CEO of investment research firm Hedgeye, explains Monday’s oil move: Post to Twitter..

Other commodities, including wheat and copper, rose on Monday, supported by a weak greenback. Copper, a major industrial input, is seen by many analysts as a barometer of recession.

“Another good example of a crashed market bouncing this morning” McCullough said Copper price behavior rose more than 3% on Monday morning after falling 8.2% last week.

Wheat futures on the Chicago exchange rose 1.6% on July 18 and recovered from their lows in about five months.

Relief rallies are common in the bear market, according to experts.

Biden, Saudi Arabia

Price movements for oil and other commodities on Monday follow Biden’s visit to Saudi Arabia. Saudi Arabia ended without a promise that the kingdom would increase its oil supply.

Biden called on Saudi Arabia and other Gulf oil producers to increase oil production to curb rising gasoline prices and, more broadly, inflation.

Inflation in the United States, measured by the Consumer Price Index (CPI), accelerated in June to a 40-year high of 9.1%.

Despite the rise in many commodities on Monday, it has been on a downtrend in recent weeks, suggesting that inflationary pressures may have eased.

Gasoline prices have fallen in the past few weeks, and gas buddy analyst Patrick de Khan said in a statement on July 17 that the most common gasoline price in the United States is now $ 3.99 per gallon. ..

Median gas prices were $ 4.39 a gallon nationwide, while the top 10% of the most expensive locations averaged $ 5.71, DeHaan added.

There was no promise to increase production from Saudi Arabia, but Biden administration officials were hoping for a little more supply bailout.

Amos Hochstein, senior energy security adviser to the State Department, said on July 17th at CBS’s “Face the Nation” that several Gulf oil producers will produce production following Biden’s trip. He said he would take “a few more steps” to increase. Don’t say how much in which country.

But ING analysts Said in a memo The Biden administration’s view that Middle Eastern producers would increase production seemed rosy, “comments from Saudi Arabia were not optimistic.”

“Saudi Arabia states that production changes will be made within the broader OPEC + framework and that the group will monitor the market and respond as needed,” except for Saudi Arabia and the United Arab Emirates. They added. , “There is almost nothing in the way of the spare capacity.”

The cartel’s current production agreement expires in September, so the market is closely watching the next OPEC + conference on supply signals.

The Oil Producing Countries Alliance will meet on August 3rd.