Oil prices rose on Monday, supported by concerns that the conflict in the Middle East will affect supplies from the main production region and speculation that the US interest rate cut last week by a larger than expected amount will support demand.
Brent crude futures for November delivery rose 60 cents, or 0.8%, to $75.09 a barrel on Monday morning, and US West Texas Intermediate crude futures for November delivery rose 64 cents, or 0.9%, to $71.64.
Both crudes rose in the previous session, supported by lower interest rates in the United States and lower US supplies following Hurricane Frances. Prices rose last week for the second week in a row.
Last Wednesday, the Federal Reserve (the US central bank) cut interest rates by half a percentage point, a larger reduction in borrowing costs than many had expected.
Interest rate cuts typically boost economic activity and energy demand, but analysts and market participants are concerned that the central bank could see a slowdown in the labor market.
“Geopolitical tensions in the Middle East between Israel and Hezbollah have intensified to some extent, which could support oil prices well given the risk of a wider conflict in the region,” said IG market strategist Yip Jun Rong.
“However, price gains have been somewhat limited, which could reflect some reservations about the actual impact on oil supplies, given that the conflict in the Middle East has been ongoing for some time now” with little disruption to supplies, he added.
Israel and Hezbollah exchanged heavy fire on Sunday, with the Lebanese group firing rockets deep into northern Israel after suffering some of the heaviest bombardment in nearly a year of conflict.
The conflict escalated sharply last week after thousands of pagers and walkie-talkies used by Hezbollah members exploded. Fingers were pointed at Israel, which has neither confirmed nor denied responsibility.
Crude oil prices rose more than 4% last week on the back of interest rate cuts in the United States, but weak demand sentiment in China, the world’s largest oil importer, limited the rally, Priyanka Sachdeva, senior market analyst at Philip Nova, said in a note.
‘Fuel demand remains uncertain,’ she added, noting that the U.S. rate cut ‘has raised concerns that the Federal Reserve may have anticipated labor markets suffering.
Source: National Iraqi News Agency