Oil Prices Plunge Amid Global Uncertainty

7月22日

Current Price Movement:
West Texas Intermediate (WTI) futures on the NYMEX have extended their downside, trading below $78.00. This decline is primarily driven by concerns over China's economic outlook and political uncertainty in the United States.

Factors Influencing the Oil Price:

China’s Economic Concerns:

The People's Bank of China (PBoC) unexpectedly reduced its Loan Prime Rate by 10 basis points to 3.35% (one-year) and 3.85% (five-year).
This rate cut follows weaker-than-expected Q2 GDP growth of 0.7%, below estimates of 1.1% and previous figures of 1.5%.
As the world's largest oil importer, China’s economic slowdown raises concerns about future oil demand, exerting downward pressure on prices.

Supply Outlook:

Morgan Stanley forecasts an increase in oil supply by 2.5 million barrels per day by 2025 from OPEC and non-OPEC producers.
The anticipated supply growth exceeds demand growth projections, contributing to the easing of tight market fears and further weakening oil prices.

US Political Uncertainty:

The potential nomination of Kamala Harris as the Democratic leader and speculation about Donald Trump’s potential victory in the upcoming presidential election have created political uncertainty.
Trump’s promise to increase US oil production if elected could lead to a future increase in supply, adding downward pressure on oil prices.
The US Dollar Index (DXY) has edged lower amidst this political uncertainty, affecting oil prices inversely.
Global Economic Indicators:

Preliminary S&P Global Manufacturing PMI data from various nations are expected to provide insights into the global demand outlook, which will further influence oil prices.

Canadian Dollar (CAD) Dynamics:

The USD/CAD pair has risen to near 1.3750, influenced by the sharp correction in oil prices.
Canada, being a leading oil supplier to the US, sees its currency affected by oil price movements. The weakening CAD amidst declining oil prices reflects this relationship.
Expectations of the Bank of Canada (BoC) cutting interest rates by 25 basis points to 4.5% due to easing price pressures and a cooling labor market also impact the CAD.

US Economic Data:

The trajectory of the US Dollar will be influenced by upcoming US economic data, providing clues about the Federal Reserve's interest rate decisions.
Political developments, such as the withdrawal of Joe Biden's re-election bid, have added to the uncertainty, impacting the DXY and, consequently, oil prices.