Oil prices climbed on Tuesday, supported by news of monetary stimulus measures in China, the world’s biggest crude importer. Meanwhile, disruption worries from the Middle East mounted, and a hurricane threatened to impact the United States, the biggest crude producer.
SINGAPORE – Brent crude futures for November rose 84 cents, or 1.14%, to $74.74 a barrel at 0620 GMT. U.S. WTI crude futures for November climbed 92 cents, or 1.31%, to $71.29 a barrel.
Market analysts said WTI’s gains were due mainly to China’s move to cut its key lending rates. “The crude oil market has been awaiting further easing measures by the Chinese authorities to offset the economic slowdown,” said Tony Sycamore, a market analyst at IG. He also said the announcement would help “remove some of the downside risks” to crude oil prices.
However, how much longer this rally will last in the medium term is still a question, as it is not certain that internal demand is catching up. Kelvin Wong, senior market analyst at OANDA, added that while ” monetary policies are getting more accommodative in China, fiscal policies remain restrictive to complement such expansionary monetary policies.”
Earlier, China’s central bank, to drive the economy and get it back on track toward the government-set targets, announced its biggest stimulus package since the pandemic. However, analysts said this was insufficient for their goals and that more fiscal support was required. In the big package of increased funding and interest rate cuts, Beijing made the latest attempt at restoring confidence after a series of disappointing economic data stoked fears of a prolonged slowdown.
Flared-up tensions in the Middle East saw Israel’s military launch airstrikes against Hezbollah positions across the border in Lebanon, leaving a significant number dead and many having fled out of areas of conflict. This cross-border bombardment comes a week after communication devices used by Hezbollah exploded in what many believe to have been an Israeli hand.
It said that the ANZ Bank,
“The oil market is increasingly concerned that an intensification of hostilities will eventually draw in the OPEC oil producers, most notably Iran, into further conflict.”.
Traders are also closely watching weather developments, with the U.S. Gulf Coast bracing itself for a possible hurricane by week’s end. A chunk of unsettled weather in the Atlantic is gaining strength, prompting warnings for oil producers. U.S. oil firms have already begun removing personnel from offshore oil production platforms in the Gulf of Mexico. Several companies have suspended operations as a hurricane heads toward critical oil-producing regions in what would be the second major hurricane to make landfall within two weeks.
