Oil prices rose on Monday on concerns that escalating conflict in the Middle East could constrain regional supply and on expectations that last week’s U.S. rate cut would support demand.
November Brent crude futures rose 60 cents, or 0.8%, to $75.09 a barrel by 0415 GMT. November U.S. oil futures rose 64 cents, or 0.9%, to $71.64.
Both contracts rose for a second week, supported by a U.S. rate cut in the previous session and a drop in U.S. supply following Hurricane Francine.
Weaker economic outlooks from China and the U.S. capped gains.
Geopolitical tensions in the Middle East are rising, and that is likely to support oil prices. However, price increases have been more moderate. Given that the Middle East conflict has been dragging on for some time and has seen few disruptions, there are some concerns about the real impact on oil supplies.
Hezbollah and Israel are facing the most intense clash in nearly a year of fighting, and on Sunday they exchanged intense shelling.
The conflict escalated sharply last week after thousands of pagers and radios used by Hezbollah members were blown up. The attack was blamed on Israel, which has neither confirmed nor denied responsibility.
Both oil indexes rose more than 4% last week, driven by the U.S. rate cut, while weak demand sentiment in top oil importer China is limiting the gains.
Fuel demand remains uncertain, and the U.S. rate cut is likely to have been a response to the Fed’s troubled labor markets.
Last Wednesday, the U.S. Federal Reserve 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 may have seen a slowing labor market.
