Sep 30 2024: Oil prices climbed for a second straight session on Monday as tensions in the Middle East heightened, raising concerns over potential supply disruptions. This follows Israel’s intensified attacks on the Palestinian militant group Hamas and Iranian-backed forces in the region.
As of 0611 GMT, Brent crude futures for November delivery rose by $1.12, or 1.56%, to $73.10 per barrel. The more actively traded December contract increased by $1.04, or 1.45%, to $72.58 per barrel. U.S. West Texas Intermediate (WTI) crude futures also advanced by 93 cents, or 1.36%, reaching $69.11 per barrel.
Despite a price rise last Friday, Brent ended last week down by about 3%, while WTI fell by around 5% due to concerns over weakening demand in China, despite fiscal stimulus efforts in the world’s second-largest economy and top oil importer.
The escalation in the Middle East, particularly fears of Iran’s involvement, has boosted oil prices. Iran is a key producer and member of the Organization of the Petroleum Exporting Countries (OPEC). Israel’s intensified strikes on Hezbollah and the Houthi militias, both backed by Iran, have raised the possibility of wider conflict, which could impact oil supply from the region.
Priyanka Sachdeva, senior market analyst at Phillip Nova, highlighted that while oversupply remains a concern for oil markets, a broader Middle East conflict could significantly disrupt oil flows from key production areas.
On Monday, Hamas reported that an Israeli strike killed one of its leaders in Lebanon. Additionally, three leaders of another Palestinian militant group were killed in a strike on Beirut. Israel also launched airstrikes against the Houthi militia in Yemen and Hezbollah targets across Lebanon, following the killing of Hezbollah’s leader.
Tony Sycamore, a market analyst at IG, noted that oil prices will continue to be driven by supply and demand dynamics, particularly as OPEC+’s voluntary supply cuts are set to end on December 1. WTI could test its 2021 lows of $61 to $62 per barrel.
Despite China’s recent fiscal stimulus, Sycamore expressed uncertainty about whether this will translate into increased fuel demand, especially considering China’s progress in electrifying and decarbonizing its transportation sector.
Data released on Monday showed that China’s manufacturing activity contracted for the fifth consecutive month, and the services sector experienced a sharp slowdown in September, further clouding demand prospects.
Later on Monday, markets will closely monitor Federal Reserve Chair Jerome Powell’s remarks for hints on the pace of monetary easing. ANZ analysts noted that seven other Fed policymakers are also scheduled to speak this week.
Phillip Nova’s Sachdeva added that the global economy may soon experience some recovery as central banks begin to ease policy. “The oil market’s future dynamics will depend on how demand responds to these rate cuts and how much Chinese demand picks up following last week’s major stimulus injection,” she said.
