Oil prices rose on Tuesday on news of monetary stimulus from top importer China and concerns that tensions in the Middle East could hit regional supply.
November Brent crude futures rose 84 cents, or 1.14%, to $74.74 a barrel by 0620 GMT. November WTI oil futures rose 92 cents, or 1.31%, to $71.29.
WTI rose this morning after China cut key lending rates. Crude markets are eyeing Chinese authorities for more easing measures to counter the economic slowdown. Today’s announcement should eliminate some downside risks with oil prices.
However, the rise in oil prices may not be sustainable in the medium term, as domestic demand remains weak and expansionary fiscal policies do not match looser monetary policies.
Earlier in the day, China’s central bank announced its biggest stimulus package since the pandemic to pull the economy out of a deflationary recession and back toward the government’s growth target, but analysts warned that more fiscal aid was crucial to achieving those goals.
The broader-than-expected package, which offers more funding and interest rate cuts, marks Beijing’s latest attempt to restore confidence after a string of disappointing data raised concerns of a prolonged structural slowdown.
In the Middle East, a key oil-producing region, the Israeli military said it launched airstrikes on Hezbollah facilities in Lebanon on Monday. Lebanese authorities said 492 people were killed and tens of thousands were forced to flee in the country’s deadliest day in decades.
Israel and the Lebanese-based Iran-backed group Hezbollah opened fire last week after thousands of pagers and radios used by Hezbollah members exploded. The attack has been blamed on Israel.
The oil market is concerned that rising tensions in the region could negatively impact the integrity of OPEC oil producers.
Traders are also monitoring the weather. A major hurricane has loomed over the United States, the world’s largest crude producer. The U.S. Gulf Coast is at risk of a hurricane attack later this week as turbulent weather in the Atlantic intensifies.
U.S. oil producers are scrambling to evacuate personnel from oil platforms in the Gulf of Mexico as the second major hurricane in two weeks is forecast to hit offshore oil fields. Several oil companies have shut down some of their production.
