Concerns about possible supply disruptions in the Middle East have grown as Israel steps up its attacks on Palestinian militant group Hamas and Iranian-backed forces in the region. Oil prices rose for a second straight session on Monday.
Brent crude futures for November delivery rose 1.56% to $1.12, or $73.10 a barrel, by 0611 GMT. That contract expires on Monday, and the more active contract for December delivery rose $1.04, or 1.45%, to $72.58.
WTI Crude futures rose 93 cents, or 1.36%, to $69.11 a barrel.
Prices also rose last Friday, but Brent fell nearly 3% for the week and WTI fell nearly 5% on demand concerns in China, the world’s second-largest economy and largest oil importer.
On Monday, prices were supported by the possibility that a widening conflict in the Middle East could directly involve Iran, a major producer, and member of the Organization of the Petroleum Exporting Countries (OPEC), after Israel stepped up attacks on Iran-backed Hezbollah and Houthi militant groups.
Oversupply is a major concern for oil markets, but investors are concerned that a regional conflict in the Middle East could affect supply in key producing regions.
Hamas said its leader was killed in an Israeli strike in Lebanon on Monday. In contrast, another Palestinian militant group said three of its leaders were killed in an attack in Beirut.
Israel, which killed the Hezbollah leader, launched airstrikes on Sunday against the Houthi militia in Yemen and dozens of Hezbollah targets across Lebanon.
In the context of Israel’s definitive attack on Hezbollah, oil prices are said to continue to be driven by supply and demand dynamics.
Given that OPEC+’s voluntary supply cuts are set to end on December 1, WTI is likely to test its lowest levels of 2021 in the $61 to $62 per barrel range.
Moreover, despite China’s recent moderation, it is unclear whether this will translate into higher fuel demand, given China’s progress in electrifying and decarbonizing its transportation sector.
Monday’s data was not encouraging on the demand front, with China’s manufacturing activity contracting for a fifth straight month and the services sector seen slowing sharply in September.
Later on Monday, markets will await news from the Fed for clues on the pace of the central bank’s monetary easing. With the Fed and other major central banks beginning to ease policy, it would be fair to expect some economic recovery.
How well demand responds to the easing of interest rates and how much Chinese demand picks up after the massive stimulus injected last week will shape the future dynamics of the oil market.
