Oil prices rise on Middle East tensions and U.S. rate cut
Shafaq News/ Oil prices rose onMonday, buoyed by concerns that heightened conflict in the Middle East maycurtail regional supply and expectations last week's outsized U.S. interestrate cut will support demand.
Brent crude futures for Novemberwere up 60 cents, or 0.8% at $75.09 a barrel at 0415 GMT. U.S. crude futuresfor November were up 64 cents, or 0.9%, at $71.64.
Both contracts rose in the previoussession on support from the U.S. interest rate cut and a dip in U.S. supply inthe aftermath of Hurricane Francine. Oil prices climbed last week for a secondweek.
A softer economic outlook from topconsumers China and the U.S. capped further gains.
"Geopolitical tensions in theMiddle East have edged up a notch between Israel and Hezbollah, which couldleave oil prices well-supported on the risks of a wider regionalconflict," said Yeap Jun Rong, market strategist at IG.
"However, price gains have beensomewhat more measured, which may reflect some reservations over the actualimpact on oil supplies, given that the Middle East conflict has been draggingfor some time now with little disruptions so far."
Hezbollah, an Iranian-backed groupbased in Lebanon, and Israel exchanged heavy fire into Sunday, as the groupsent rockets deep into northern Israeli territory after facing some of the mostintense bombardment in almost a year of conflict.
The conflict has escalated sharplyin the past week after thousands of pagers and walkie-talkies used by Hezbollahmembers exploded. The attack was widely blamed on Israel, which has notconfirmed or denied responsibility.
While both oil benchmarks rose morethan 4% last week on the back of the U.S. rate cut, weaker demand sentiment intop oil importer China is capping the upswing, said Phillip Nova, senior marketanalyst Priyanka Sachdeva, in a note.
"The demand for fuel is stillup in the air," she said, adding that the U.S. rate cut "raisedconcerns that the Fed may have envisioned ailing labor markets".
Last Wednesday, the U.S. FederalReserve cut interest rates by half a percentage point, a larger decrease inborrowing costs than many expected.
Interest rate cuts typically boosteconomic activity and energy demand, but analysts and market participants areconcerned the central bank may see a slowing job market.
(REUTERS)
