Oil drops as investors eye Biden departure, weak fundamentals

Oil prices hit lowest level in more than a month

Biden abandons re-election campaign, endorses Vice President Harris

Morgan Stanley analysts believe the oil market will be in surplus in 2025

Yemen’s Houthis say they will continue to attack Israel

NEW YORK (AP) — Oil prices fell for a second straight session on Monday to their lowest in more than a month, as investors focused on U.S. President Joe Biden’s decision to end his re-election campaign and on signs of rising stockpiles and weak demand.

Brent crude futures fell 54 cents, or 0.7%, to $82.09 a barrel by 2:04 p.m. ET, the lowest since June 11. The U.S. West Texas Intermediate crude futures contract for August delivery, which expires on Monday, fell 33 cents to $79.80 a barrel, a one-month low.

WTI futures for September delivery fell 55 cents to $78.09.

Biden ended his re-election campaign on Sunday and endorsed Vice President Kamala Harris as the Democrats’ nominee should she face Republican Donald Trump in November’s election.

The trading desk of US fuel distributor TACenergy wrote on Monday that traders took Biden’s decision seriously, while ignoring the growing tensions in the Middle East. Market participants were focusing on a weak technical outlook, ample inventory and low demand, he wrote.

According to Morgan Stanley analysts, although the situation in the oil market is clearly tight at the moment, it is expected to reach a balance by the fourth quarter of this year and a surplus by next year, pushing Brent prices into the mid-to-high $70s in 2025.

Energy policy will likely be a key debate issue between Harris and Trump, but Citi analysts believe neither will promote policies that have an overt impact on oil and gas operations.

In the Middle East, Israeli warplanes attacked Houthi military positions near Yemen’s Hodeidah port on Saturday, killing at least six people. The Houthis told the media on Sunday that they would continue to attack Israel and would not follow any rules.

Israel also sent tanks into Gaza’s Khan Younis area and at least 70 Palestinians were killed in Israeli fire, Gaza medics said on Monday.

On the other hand, top oil importer China surprised markets by lowering key short-term policy interest rate and benchmark lending rates to boost its economy, but the move failed to support oil prices.

“China’s interest rate cuts have been too small to boost overall sentiment for crude oil,” said UBS analyst Giovanni Staunovo.

The US Federal Reserve will hold a policy meeting on July 30-31, with investors expecting it to keep interest rates steady, although there have been hints of a possible cut in September.

“If we get a signal of a rate cut, the Fed could take a positive stance on risk-sensitive assets like oil,” Stonovo said.

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