WTI crude oil futures dip near $83, here’s why

on Jul 8, 2024
  • Hurricane Beryl shut U.S. refineries and ports along the Gulf of Mexico
  • Pessimism regarding China's energy consumption exacerbated negative sentiment in oil markets
  • Negotiations are currently underway regarding a U.S. ceasefire proposal aimed at ending the conflict in Gaza.

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In the tumultuous beginning of the trading week, the U.S. West Texas Intermediate (WTI) crude futures continued their decline, hovering near $83 per barrel as market participants carefully assessed immediate threats to global oil supplies.

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This drop follows a recent decrease from a peak above $84 reached on July 4th, underscoring the ongoing balancing act in oil markets.

Brent futures declined by 75 cents, or 0.9%, to $85.79 per barrel as of 11:46 a.m. EDT (1546 GMT). Meanwhile, WTI crude dropped by 84 cents, or 1.0%, to $82.32.

Impact of Hurricane Beryl and supply concerns

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Hurricane Beryl’s landfall in Texas at the week’s outset sparked significant concern, prompting major oil companies to adjust their operations. Texas produces the most oil and natural gas of any U.S. state.

However, speculation soon spread that the storm’s impact on output would be less severe than initially feared, swiftly altering market sentiment.

This shift in sentiment prompted traders to sell positions that had earlier factored in heightened supply concerns, exerting downward pressure on oil prices.

Canadian wildfires and oil operations

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Concurrently, fears of oil supply disruptions eased as wildfires in Canada, particularly near Suncor’s infrastructure, showed no significant signs of spreading. 

This revelation alleviated market anxieties, reducing concerns about potential production disruptions that could have tightened an already constrained supply.

China’s energy demand woes

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A wave of pessimism regarding China’s energy consumption exacerbated negative sentiment in oil markets. 

Recent data revealing a decline in oil supertankers heading towards China—marking the lowest level in two years—underscored mounting apprehensions over the country’s energy usage.

This decline in tanker movements signals weaker demand for crude oil from one of the world’s leading energy consumers, adding further downward pressure on oil prices.

As oil traders navigate through shifting supply dynamics and uncertain demand, market volatility is anticipated to persist in the days ahead. 

Participants must adapt to evolving geopolitical and economic factors influencing the global oil market.

Other factors:

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In the Middle East, negotiations mediated by Qatar and Egypt are currently underway regarding a U.S. ceasefire proposal aimed at ending the nine-month conflict in Gaza. If these talks bring concrete results, this might temporarily alleviate some of the geopolitical tensions impacting the market.

Elsewhere, global investors closely monitored recent elections in the UK, France, and Iran to gauge their potential impacts on geopolitical landscapes and energy policies. 

Following Sunday’s elections, the French left expressed intentions to govern, although acknowledging that negotiations would be challenging and time-consuming, particularly after thwarting the far-right’s bid for power and resulting in a hung parliament.

In the United States, President Joe Biden reiterated his commitment to his reelection campaign amid concerns from fellow Democrats about potential losses in both the White House and Congress in the upcoming November 5 elections.

In India, the world’s third-largest oil consumer, fuel consumption rose by 2.6% year-on-year to 19.99 million metric tons in June compared to the previous year.

Meanwhile, Germany reported a larger-than-anticipated decline in exports for May, largely attributed to weakened demand from China, the United States, and other European nations.

Kazakhstan’s energy ministry announced plans to compensate for exceeding its OPEC+ oil output quota in the first half of the year by September 2025. 

This move aligns with OPEC’s ongoing efforts, alongside its allies in OPEC+, to extend most oil output cuts through 2025.

Global economic implications of oil price decline

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The recent downturn in oil prices has wide-ranging implications for global economies, impacting consumer spending, inflation rates, oil-producing and oil-importing nations, and geopolitical landscapes.

Countries will need to vigilantly monitor and adjust policies to manage the effects of fluctuating oil prices effectively.

Commodity Energy North America