SINGAPORE, Aug 26 (Reuters) – Oil prices increased on Monday due to concerns that the Gaza conflict might spread throughout the Middle East and disrupt regional oil supplies. Additionally, expectations of upcoming U.S. interest rate cuts have boosted the global economic outlook and fuel demand.
By 0615 GMT, Brent crude futures had risen by 56 cents, or 0.7%, to $79.58 per barrel. U.S. crude futures were up 57 cents, or 0.75%, reaching $75.40 per barrel.
On Sunday, one of the most significant clashes in over ten months of border warfare occurred when Hezbollah launched hundreds of rockets and drones into Israel. In response, Israel’s military conducted airstrikes on Lebanon, deploying around 100 jets to prevent a larger attack. This escalation raises concerns that the Gaza conflict could expand into a regional crisis, potentially involving Iran, Hezbollah’s supporter, and the United States, Israel’s key ally.
“Geopolitical risk factors are likely to have a significant impact on the oil market,” said Kelvin Wong, a senior market analyst at OANDA in Singapore. “The possibility of retaliation by Hezbollah and Iran following Israel’s pre-emptive strike on Hezbollah positions in Southern Lebanon may support WTI crude prices.”
Oil prices gained more than 2% on Friday after U.S. Federal Reserve Chair Jerome Powell signaled the start of interest rate cuts.
Sachdeva noted that the cartel had recently lowered its global oil demand forecast due to weak demand from top oil importer China. “Currently, strong U.S. demand and the refilling of the Strategic Petroleum Reserve (SPR) appear to be the main factors supporting oil prices against the risk of excess supply from OPEC,” she added.
On Friday, the U.S. Energy Department announced it had purchased nearly 2.5 million barrels of oil to help replenish the SPR. According to Baker Hughes, the number of active U.S. oil rigs remained steady at 483 last week.