Oil prices fall as investors react to Biden’s exit, focusing on Fed rate cuts; Brent crude at $81.95/bbl

Oil prices fell on Monday following President Joe Biden’s announcement that he would not seek a second term, while investors speculated about potential US interest rate cuts as early as September.

By 1327 GMT, Brent crude futures were down 68 cents, or 0.82 percent, at $81.95 a barrel. U.S. West Texas Intermediate crude futures fell 69 cents to $79.44 a barrel.

Over the past month, Brent crude has remained relatively stable, hovering between $82 and $88 per barrel.

“The rupee was flat at 83.66 as the dollar index eased to $104 from $104.11. Crude oil prices also eased to $78.49 from $78.66, supporting the rupee. Tomorrow’s forthcoming Union Budget is expected to provide a strong outlook for the rupee as it outlines India’s revenue and expenditure roadmap for the coming year. The rupee remains in the broad range between 83.25 and 83.80,” said Jateen Trivedi, VP Research Analyst – Commodities & Currency, LKP Securities.

What is weighing on the price of crude oil?

The US Federal Reserve is scheduled to review its policy on July 30-31. Investors expect the Fed to keep rates on hold, although there are signs of a possible rate cut in September.

Higher interest rates raise borrowing costs for consumers and businesses, which can reduce demand for oil.

In other news, President Biden’s decision on Sunday to drop his re-election bid did not significantly affect oil markets, according to analysts. He endorsed Vice President Kamala Harris to run against Republican Donald Trump in the November election.

Meanwhile, China’s slower-than-expected economic growth of 4.7 percent in the second quarter raised concerns about the country’s oil demand and continues to put pressure on prices.

“Petroi began July trying to break resistance to the downside that has formed on weekly time frames since March 2022. Reversals from increasingly lower levels are supported by a slowdown in the global economy and stagnant demand. The only thing holding the price back from a real collapse is that oil supply has also declined or stagnated in recent months. Oil at $77.7 is testing crucial support in the form of the 200-week moving average (now at $76.7) for the second time in eight weeks. Since the beginning of 2023, touches of this line have coincided with significant interventions by OPEC+ when the cartel reduced quotas or delayed their increase,” said Alex Kuptsikevich, senior market analyst FxPro.

On Monday, China unexpectedly cut a key short-term policy interest rate and benchmark lending rates to boost the economy, although analysts noted the support was limited.

In addition, on Sunday, China released a policy document after a meeting of leaders that reiterated known goals such as developing advanced industries and improving the business environment.