Oil Prices Rise Amid Middle East Conflicts
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Oil prices experienced an increase on Monday, driven by ongoing conflicts in the Middle East and rising expectations of increased oil demand from the world’s largest consumers, the United States and China. Despite this upward trend, speculation regarding a potential increase in oil production from Saudi Arabia in December kept further price hikes in check.
As of 10:40 a.m. local time (0740 GMT), the international benchmark Brent crude rose by 0.02% to $71.95 per barrel, a slight increase from the previous session’s close of $71.93. Conversely, US benchmark West Texas Intermediate (WTI) declined by 0.16%, trading at $68.32 per barrel after closing at $68.43 in the earlier session.
Analysts are looking ahead to upcoming employment data for insights into the US Federal Reserve's next moves and to gain a better understanding of the US economy. Recent lower-than-anticipated inflation figures have fueled speculation that the Fed may prioritize labor market support, potentially leading to continued interest rate cuts.
Currently, there is a strong expectation that the Fed will reduce rates by 75 basis points by year’s end, with a 54% likelihood of a 50 basis point cut occurring in November. Such interest rate reductions are anticipated to stimulate economic activity and increase oil demand.
Further supporting the rise in oil prices is the expectation that measures taken by China to enhance economic mobility will bolster oil consumption in the country. Recent economic incentives announced by the Chinese government, including plans for banks to lower mortgage interest rates to address challenges in the housing sector, are positively impacting market sentiment.
On the flip side, there are concerns that Saudi Arabia, the largest producer within the Organization of the Petroleum Exporting Countries (OPEC), may increase oil output in December to reclaim market share, which has limited price gains.
In June, the OPEC+ group, which consists of OPEC members and other major producers like Russia, agreed to extend voluntary cuts of 2.2 million barrels per day until September, with a gradual phase-out planned until September 2025. However, Saudi Arabia’s recent pivot towards increasing supply is in response to various factors, including production from non-OPEC countries and weaker global demand, which have offset the group’s efforts to maintain elevated oil prices.
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