Oil prices saw a slight increase in early trade on Monday, driven by concerns over conflict in the Middle East potentially affecting supply in the region and expectations of increased demand following the recent U.S. interest rate cut.
November futures for oil were up 0.3% at $74.69 a barrel, while November futures for oil were also up 0.3% at $71.22.
The previous session saw both contracts rise, supported by the U.S. interest rate cut and a decrease in U.S. supply post-Hurricane Francine. This led to oil prices climbing for a second consecutive week.
The U.S. Federal Reserve’s decision to cut interest rates by half a percentage point last week was larger than anticipated, with the aim of boosting economic activity and energy demand. However, concerns remain about the impact of a slowing job market.
ANZ highlighted that the conflict between Israel and Iranian-backed militias has raised fears of potential involvement from Iran, a significant oil producer in the region.
Hezbollah and Israel have been engaged in intense conflict, with Hezbollah launching rockets into northern Israeli territory in response to alleged attacks on its members. The situation escalated further after an explosion of Hezbollah communication devices, which was attributed to Israel.
Analysis:
The increase in oil prices due to Middle East conflict and the U.S. interest rate cut highlights the delicate balance between geopolitical tensions and economic factors in the oil market. Investors should monitor developments in the region and the impact of central bank decisions on energy demand to make informed investment decisions.