Crude Oil Futures Hit Monthly Lows Amid Geopolitical Tensions and Weak Demand

Crude oil futures have seen a significant drop, reaching their lowest levels in over a month. On Tuesday, the West Texas Intermediate September contract was priced at $77.94 per barrel, down by 46 cents or 0.59%. This decline comes despite recent military actions between Israel and Houthi militants in Yemen, which typically might raise concerns about oil supply disruptions. However, the market seems to be overlooking these geopolitical tensions, leading to the somewhat bearish overall sentiment in oil prices.

Recent events involved Houthi drone strikes in Tel Aviv, resulting in one fatality, which prompted Israel to retaliate with airstrikes on Houthi facilities in Yemen. Notably, these oil-related impacts have not added any significant risk premium to prices, as indicated by a note from Goldman Sachs. The draw on U.S. crude supplies has not translated into higher prices, as summer gasoline demand has been weaker than expected, with a reported decline of 615,000 barrels per day in the week ending July 12.

While the ongoing wildfires in Alberta present a potential risk to Canadian crude supplies, production has so far remained steady. Over a third of the wildfires are reported to be uncontrolled, which could threaten 400,000 barrels of daily production. Despite these risks, experts predict that the oil market may deal with a slight undersupply of around 200,000 barrels per day in 2024, as healthy demand growth is forecasted for the remainder of the year. As analysts keep a close watch on these developing situations, the future of oil prices remains uncertain.