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, while a major hurricane loomed over the United States, the world’s biggest crude producer.
Brent crude futures for November were up 84 cents, or 1.14%, at $74.74 a barrel, as of 0620 GMT. U.S. WTI crude futures for November rose 92 cents, or 1.31%, to $71.29.
“WTI has gained this morning after China moved to lower its key lending rates. The crude oil market has been looking desperately towards Chinese authorities for further easing measures to counter the economic slowdown,” said Tony Sycamore, market analyst at IG.
“Today’s announcement will go some way to removing downside risks to the crude oil price,” Sycamore said.
The rally in oil prices may not, however, be sustainable in the medium term, as internal demand may continue to be weak while more accommodative monetary policies are not matched by expansionary fiscal policies, said Kelvin Wong, senior market analyst at OANDA.
Earlier in the day, China’s central bank unveiled its biggest stimulus since the pandemic to pull the economy out of its deflationary funk and back towards the government’s growth target, but analysts warned more fiscal help was vital to hit these goals.
The broader-than-expected package offering more funding and rate cuts marks Beijing’s latest attempt to restore confidence after a slew of disappointing data raised concerns of a prolonged structural slowdown.
In the Middle East, a key oil-producing region, Israel’s military said it launched airstrikes against Hezbollah sites in Lebanon on Monday, which Lebanese authorities said killed 492 people and sent tens of thousands fleeing for safety in the country’s deadliest day in decades.
Israel and Hezbollah, an Iranian-backed group based in Lebanon, exchanged fire after thousands of pagers and walkie-talkies used by Hezbollah members exploded last week. The attack was widely blamed on Israel.
“The oil market has been concerned that rising tensions in the region were dragging the OPEC oil producer closer to engagement,” ANZ bank said in a note, referring to Iran.
“Traders are also keeping an eye on the weather. The U.S. Gulf Coast is at risk of a hurricane strike by the end of the week as a patch of turbulent weather in the Atlantic consolidates.”
U.S. oil producers were scrambling to evacuate staff from oil production platforms in the Gulf of Mexico as the second major hurricane in two weeks was predicted to tear through offshore oil-producing fields. Several oil companies paused some of their production.