On Tuesday (July 23) in the Asian market, international oil prices were hovering at low levels, with US crude oil currently trading around $78.26 per barrel. Oil prices fell for the second consecutive trading day on Monday, reaching their lowest level in over a month. Investors were indifferent to US President Biden's decision to end his re-election campaign and focused on signs of increased inventory and weak demand.

Brent crude oil futures fell $0.23, or 0.3%, on Monday, settling at $82.40 per barrel, the lowest since June 11th. August US crude oil futures, which expire on Monday, fell $0.35 to $79.78 per barrel, the lowest level in a month. US crude oil September futures fell 0.46% on Monday, closing at $78.24 per barrel.

Biden gave up his troubled re-election campaign on July 21st under increasing pressure from his Democratic colleagues and supported Vice President Harris to replace him as the party's candidate, facing Republican candidate Trump in the November election.

US Vice President Harris quickly strengthened Democratic support for her presidential campaign on Monday. After President Biden suddenly announced his withdrawal from the race, she received promises from hundreds of national representatives, announced the raising of large funds, and gained support from senior Democrats.

Former Speaker of the United States House of Representatives Pelosi expressed support for Harris to succeed Biden as the Democratic presidential candidate. Pelosi maintains her influence even after stepping down as Speaker of the House in 2022. Many key figures within the Democratic Party also support Harris.

Sources indicate that the Trump campaign team has been preparing for Harris to become a potential candidate for several weeks. The Trump team released a detailed document on Monday criticizing Harris' record on immigration and other issues, accusing her agenda of being more liberal than Biden's.

The trading department of TACenergy, a US fuel distributor, wrote on Monday that traders are indifferent to Biden's decision and have shaken off the impact of escalating tensions in the Middle East. They wrote that market participants are concerned about weak technological prospects, sufficient inventory, and weak demand.

However, relatively speaking, the increase in political uncertainty generally tends to suppress market risk-taking sentiment, and the stock market and commodities such as crude oil are generally subject to some drag.

Morgan Stanley analysts say that although the oil market is clearly tight, it is expected to reach equilibrium by the fourth quarter and there will be a surplus by next year, dragging Brent crude down to the mid to high end of the $70 range in 2025.

According to StoneX's analysis, global oil inventories increased last week. StoneX analyst Alex Hodes pointed out that, except for Europe, the total inventory of oil and finished products in all major trading centers is on the rise.

In the Middle East, Israeli fighter jets attacked Houthi armed military targets near the port of Hodeidah in Yemen on Saturday, resulting in at least six deaths. The Houthi armed forces told the media on Sunday that they will continue to attack Israel and will not abide by any rules of engagement.

On the 22nd local time, the Israeli military announced that in the past day, they have carried out airstrikes on about 35 targets in the Gaza Strip, including armed personnel and their military buildings. The Israeli ground forces continue to operate in the Rafa area based on intelligence. With the cooperation of Israeli fighter jets, the Israeli ground forces killed dozens of armed personnel in close range combat. Previously, Israeli airstrikes killed a senior member of the Palestinian Islamic Resistance Movement (Hamas) who had participated in multiple attacks against the Israeli army. In the central Gaza Strip, the Israeli army has killed multiple armed personnel and destroyed a rocket launch site in the past day.

On the 22nd, the Palestinian Gaza Strip health department issued a statement saying that the Israeli army bombed the southern Gaza Strip city of Khan Younis, causing at least 70 deaths and over 200 injuries.

On July 22nd local time, the armed faction of the Palestinian Islamic Resistance Movement (Hamas), the Kassan Brigade, released a war report stating that its armed personnel used "Yashin-105" rockets and anti tank missiles to hit three Israeli "Merkava" tanks and one Israeli military bulldozer in the eastern area of the southern Gaza Strip city of Khan Younis.

On Monday, Asian powers unexpectedly lowered key short-term policy rates and benchmark loan rates to boost the economy. But this move failed to provide support for oil prices.

UBS analyst Giovanni Staunovo said, "The magnitude of interest rate cuts by major Asian countries is too small to boost overall sentiment towards crude oil

The Federal Reserve will hold a policy meeting on July 30-31, and investors expect interest rates to remain stable at that time, but there are indications that a rate cut may occur in September.

In September 2021, after the inflation rate exceeded the Fed's 2% target for three consecutive months, Fed staff and decision-makers changed their passive attitude towards inflation and began using the term "elevated" to describe it.

In May, June, and July of that year, the Federal Reserve only described high inflation after the personal consumption expenditure (PCE) price index, which is used to set inflation targets, rose by more than 4%. Although the PCE price index has dropped to 2.6% and appears to be still declining, this description is still retained in the policy statement of the Federal Open Market Committee (FOMC) responsible for setting interest rates.

The Federal Reserve's policy meeting next week may ultimately remove this description. If that's the case, would it be the strongest so far? The signal indicates that the central bank plans to cut interest rates as early as September and initiate the easing phase of its monetary policy cycle. Investors currently believe that a rate cut in September is almost a certainty.

Adjusting the description of inflation from high to more moderate terms may also lead to the Federal Reserve modifying another key sentence in its current policy statement: it will not cut interest rates until officials have "more confidence in the continued move towards 2% inflation rate".

After the PCE price index fell below 3%, Federal Reserve officials stopped describing inflation as high in January. Prior to the July 30-31 meeting, several policymakers stated that inflation in the overall economy was slowing down more comprehensively and strengthened their confidence that inflation would continue to slow down.

They have started using terms such as' getting closer 'to describe how far they are from a policy shift and hinted at possible thresholds that could prompt the Federal Reserve to change its description of the economy and its policy response.

Atlanta Federal Reserve Bank President Raphael Bostic hinted in a comment to reporters at the end of June that if the inflation rate reaches 2.5% or below, it can be used as an indicator to at least consider adjusting the inflation description.

Many economists believe that the June PCE data released on July 26th will reach or exceed this threshold

From the daily chart, the MACD and KDJ death crosses are currently running well. After continuously falling below the support of the 55 day moving average and 100 day moving average, US crude oil has once again fallen below the 200 day moving average, and the bearish signal has strengthened. The short-term trend is towards the support near the low point of 76.15 on May 24th. If it breaks further, it will look towards the low point of 72.48 in June. If oil prices can hold the support around 76.15, there is a chance for a volatile rebound at that time. But it needs to rise above the 80 level to reverse bearish expectations.

Daily chart of major US crude oil contracts