Oil Rises as Biden Quits US Race, Blazes Threaten Canadian Wells

On Jul 22, 2024

(Bloomberg) — Oil edged higher — after slumping almost 3% on Friday — as investors weighed the fallout from President Joe Biden’s decision not to seek reelection, while wildfires menaced some production in Canada.

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Global benchmark Brent rose toward $83 a barrel after posting its biggest one-day drop since early June, while West Texas Intermediate was near $81. Biden abandoned his bid for a second term as concern mounted he couldn’t beat Donald Trump, and endorsed Vice President Kamala Harris. The US dollar eased in Asian trading, benefiting commodities priced in the currency.

In Canada, a blast of heat across the Alberta oil patch has triggered a wave of wildfires. An estimated 348,000 barrels a day of production are at risk, according to Alberta Wildfire and Alberta Energy Regulator data.

Oil has pushed higher this year as OPEC+ reined in output, setting the scene for a drawdown in global stockpiles over the northern hemisphere summer. Geopolitical tensions have also been to the fore, with Israel’s war against Hamas and clashes with Iran-backed groups including the Yemen-based Houthis sparking concerns of regional instability that could threaten supply.

At the weekend, Israel struck targets around the Houthi-held Red Sea port of Hodeidah in retaliation for a drone attack on Tel Aviv. The airstrikes were aimed at facilities including fuel-storage sites, with a Houthi-run television channel showing flames and smoke raging at the installations it said were hit.

Market metrics point to tight near-term conditions. Brent’s prompt spread — the difference between its two nearest contracts — was more than $1 a barrel in backwardation, a bullish pattern. Two weeks ago, the gap was 76 cents.

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