Oil prices experienced a decline as markets reacted to heightened political risk following an assassination attempt on former President Donald Trump, a prominent Republican candidate. Brent crude hovered near $85 per barrel, while West Texas Intermediate traded below $82 after an initial uptick. The incident injected fresh uncertainty into the U.S. presidential election, influencing market sentiment.
Simultaneously, the U.S. dollar saw moderate gains, increasing the cost of commodities like oil that are priced in dollars, thus impacting global buyers.
Despite the recent downturn, oil prices have maintained a higher trajectory throughout the year, supported by production cuts from OPEC+ and robust fuel demand during the summer in the Northern Hemisphere. Attention has also turned to China’s Third Plenum of the Communist Party, where economic and political strategies will be outlined, influencing the world’s largest importer of crude oil.
Concerns over China’s economic slowdown have tempered market optimism, as data shows a decline in its appetite for commodities from crude oil to soybeans in the first half of the year. The International Energy Agency (IEA) has suggested that this slowdown could potentially dampen global oil demand growth, although OPEC presents a more optimistic outlook in its latest report.
Warren Patterson, head of commodities strategy at ING Groep NV, noted, “The attempted assassination of former President Donald Trump has led to a stronger U.S. dollar, which is exerting downward pressure on oil prices. Additionally, market sentiment is adjusting to the possibility of weaker-than-expected Chinese oil demand this year.”
Despite these concerns, near-term oil demand indicators remain robust, with Brent’s near-term contracts maintaining a bullish, backwardated structure. This structure, where the nearest contract trades at a premium over later-dated contracts, has strengthened significantly over the past month, underscoring current market dynamics.
The developments in both political risk and economic indicators, particularly from China, will continue to shape oil market sentiment in the coming weeks.
