Oil prices have stabilized after a two-session decline, with Brent crude futures for September rising to $82.51 a barrel and U.S. West Texas Intermediate (WTI) crude climbing to $78.45 per barrel.
Key Takeaways
Market Stability Amid Surplus Predictions: Oil prices stabilized with Brent crude futures at $82.51 per barrel and WTI crude at $78.45 per barrel, amidst predictions of a potential oil supply surplus by next year.
Demand Concerns Impacting Prices: Weakened demand signals and the possibility of a resolution in Gaza could further decrease oil prices, with analysts forecasting a balanced market by the fourth quarter.
Geopolitical Developments in Focus: The market is closely monitoring geopolitical events, such as the damage to Russia's Tuapse oil refinery from a Ukrainian drone attack, which could affect refined product prices and crude oil availability for export.
Oil Supply Surplus Market Reactions
Oil prices steadied on Tuesday as investors remained cautious amid expectations of an oil supply surplus and weak demand, despite the U.S. presidential campaign upheaval. Traders largely ignored President Joe Biden's decision to call off his reelection bid and endorse Vice President Kamala Harris. Analysts believe neither Harris nor Republican nominee Donald Trump will implement policies significantly impacting oil and gas operations.
Surplus Predictions
Morgan Stanley analysts forecast a balanced market by the fourth quarter and a potential oil supply surplus by next year, which could drag Brent prices down to the mid-to-high $70s per barrel range. Priyanka Sachdeva, senior market analyst at Phillip Nova, noted that any uptick in oil prices was due to market consolidation and dip-buying activity.
Demand Concerns
Weakened demand signals, combined with a resolution in Gaza, could further decrease oil prices. A preliminary Reuters poll estimated that U.S. crude stocks fell by 2.5 million barrels in the week to July 19, while gasoline stocks likely dropped by 500,000 barrels. The American Petroleum Institute is set to release its estimates for last week's oil inventories, with official U.S. government data scheduled for Wednesday.
Geopolitical Factors
The market is also watching developments in Russia, where the Tuapse oil refinery, the biggest on the Black Sea, was damaged in a major Ukrainian drone attack. ING market strategists noted that further strikes on Russian refinery capacity could support refined product prices due to lower output and increase crude oil availability for export.
Conclusion
While oil prices have found some stability, the market remains cautious with the looming threat of an oil supply surplus and weak demand. Investors are closely monitoring geopolitical developments and upcoming inventory data to gauge future price movements.
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