Crude oil is declining across the two main standards today by 0.2% and 0.3% for both Brent and West Texas Intermediate, as part of the continuous declines for the third day in a row after prices reached their highest levels since approximately mid-last April.
The declines in crude come with the decline of concerns about the safety of oil supplies in the US after the oil facilities were not damaged, in addition to the hope that a ceasefire could be reached in Gaza, which would defuse a wide-ranging regional war.
The Category 1 hurricane – formerly of Category 5 – that came with Tropical Storm Beryl did not cause any damage to the oil shipment facilities on the Gulf Coast after they were closed precautionarily, while it caused a number of casualties and left more than two million users without electricity there.
In the Middle East, there is some hope that a ceasefire can be reached in Gaza, with the ongoing negotiations that have so far yielded nothing that would lead to a significant change in the current situation. This cessation of hostilities would remove the specter of a regional war preparing to erupt from the gates of southern Lebanon, and it may extend to include more than one country in the region or even outside it, thus maintaining a state of uncertainty in energy markets.
Even though, I do not think that the political reality in Israel serves the path of calm on both of the raging fronts, with the far-right parties pushing towards further escalation.
Globally, the economic reality does not seem to help energy market maintain its gains for long. Services and manufacturing activities in the US are contracting, unemployment is rising, and the housing market is recording more signs of weakness, as part of a series of data that we have witnessed since the beginning of July.
Economic activities are still contracting at a faster pace in the Eurozone as well, and investors have become noticeably more pessimistic after eight months of continuous improvement according to this month’s Sentix survey as well. In China, despite the growth in activities, sentiment about the coming months has fallen to its lowest levels in years.
While there remains hope that the interest rate will be cut next September or November in light of the recent negative data among the factors supporting oil prices, as it causes a reduction in Treasury bond yields, thus weakening the dollar, with which crude oil is valued.
