The clashes have raised concerns that the Gaza conflict could escalate into a regional conflict. | Photo: Bloomberg
2 min read Last Updated: August 26, 2024 | 03:37 PM IST
Oil prices rose 1% on Monday as escalating conflict in Gaza renewed concerns that it could disrupt oil supplies in the region, extending gains from Friday when prospects of U.S. interest rate cuts improved the outlook for the global economy and fuel demand.
Brent crude futures rose 79 cents, or 1%, to $79.81 a barrel by 9:10 a.m., while U.S. crude futures rose 80 cents, or 1.07%, to $75.63 a barrel.
Hezbollah fired hundreds of rockets and drones at Israel on Sunday in one of the largest clashes in the border conflict that has been going on for more than 10 months, and the Israeli military said it had bombarded Lebanon with around 100 jets to thwart a larger attack.
The clashes have raised concerns that the Gaza conflict could become a regional conflict involving Hezbollah's backer Iran and Israel's main ally, the United States, but so far have not affected oil production.
“Oil prices continue to rise following Israeli and Hezbollah attacks over the weekend, but the situation seems to have calmed down again, which is why any increases are limited,” said Carsten Fritsch, an analyst at Commerzbank.
Both oil benchmarks rose more than 2% on Friday after Federal Reserve Chairman Jerome Powell gave the go-ahead to start cutting interest rates.
“The prospect of easing monetary policy boosted sentiment across commodity markets,” ANZ analysts said in a note.
Priyanka Sachdeva, senior market analyst at Philip Nova, said investors remain cautious about any actions by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, known as OPEC+, which are planning to increase production this year.
“The oil cartel recently downgraded its global oil demand forecast, citing concerns about weaker demand from China, the largest oil importer,” Sachdeva said.
“Current robust U.S. demand and replenishment of SPR stockpiles appear to be the only support for oil prices against the risk of OPEC oversupply,” she said, referring to the U.S. Strategic Petroleum Reserve (SPR).
Saxo Bank analyst Ole Hansen added that oil prices could be supported in the short term if OPEC+ postpones plans to increase production in October.
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First Published: 26 August 2024 | 03:37 PM IST
