Oil in Retreat as Traders Weigh Mideast Supply After Biden Trip

(Bloomberg) — Oil slid as investors weighed the odds of more supply from the Middle East after a landmark trip to the region by US President Joe Biden.

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West Texas Intermediate sank below $97 a barrel after last week dropping almost 7% as investors fretted that a global slowdown may hurt demand and the dollar hit a record. US energy envoy Amos Hochstein said he is confident Persian Gulf producers will raise output after Biden’s visit to Saudi Arabia.

Investors also focused on the return of crude from Libya. Prime Minister Abdul Hamid Dbeibah said that the country’s exports are on track for a full resumption after months of outages as he justified his replacement of the leadership at state-run oil company National Oil Corp.

Crude has slumped since mid-June as concerns about a potential recession ripped through commodity markets, eroding the gains that followed Russia’s invasion of Ukraine. While the drop has been a boost for the US administration, Biden remains eager to get the Organization of Petroleum Exporting Countries to add supplies to bring prices down further and help quell inflation.

Following Biden’s visit, Saudi ministers insisted that policy decisions would be taken according to market logic and within the OPEC+ coalition, a grouping that includes Russia. The next meeting is due on Aug. 3, coming after the cartel agreed to revive the supply that were halted during the pandemic.

“The OPEC+ quota system ends in September, and attention is turning to what will happen next,” said Stephen Innes, managing partner at SPI Asset Management. “I would not be surprised to see something packaged at the end of OPEC September agreement, or even sooner, that may allow those with spare capacity to up their quota a touch and Biden could declare a win.”

A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies. The dollar has surged as the US Federal Reserve tightens monetary policy aggressively to tame roaring inflation.

In India, meanwhile, gasoline and diesel sales during the first half of July dropped from last month as seasonal rains cut demand in the third-biggest energy consumer. The drop was the first monthly decline in three months.

While futures have fallen in recent weeks, the market remains in backwardation, a bullish pattern marked by near-term prices trading above longer-dated ones. Brent’s prompt spread — the gap between its two nearest contracts — was almost $4 a barrel, up from $2.73 about a month ago.