U.S. crude oil prices increased by over 1% on Thursday, following the Federal Reserve’s first interest rate cut in more than four years and amidst rising tensions in the Middle East.
On Wednesday, the Fed unexpectedly reduced rates by half a percentage point, which was more than anticipated. Despite this, oil prices ended the day slightly lower as the market had largely factored in the rate cut.
The U.S. benchmark has now recovered its losses for the year, although it remains down by over 11% for the third quarter.
Phil Flynn, a senior market analyst at Price Futures Group, noted that the Fed’s rate cut seems to be prompting some hedge funds to move away from their bearish stance on oil.
Here are the closing energy prices for Thursday:
West Texas Intermediate (October contract): $71.95 per barrel, an increase of $1.04 or 1.47%. For the year, U.S. crude oil has risen by less than 1%.
Brent (November contract): $74.88 per barrel, up by $1.23 or 1.67%. The global benchmark has seen a nearly 3% decrease year to date.
RBOB Gasoline (October contract): $2.06 per gallon, up by 2.45%. Gasoline prices have dropped by about 2% so far this year.
Natural Gas (October contract): $2.348 per thousand cubic feet, up by 2.8%. Gas prices have fallen by over 6% year to date.
Crude oil futures are rebounding as tensions between Israel and Hezbollah, an Iranian-backed militia in Lebanon, intensify. Prices are also supported by a decrease in U.S. oil stockpiles by 1.6 million barrels in the previous week.
On Thursday, Israeli forces conducted airstrikes and artillery attacks against Hezbollah in southern Lebanon. This follows a series of explosions involving pagers and walkie-talkies used by the militia, which resulted in dozens of deaths and thousands of injuries across Lebanon. U.S. officials have indicated that Israel was behind the attacks, although Israel has not claimed responsibility.
Israeli Defense Minister Yoav Gallant stated on Wednesday that the country’s focus is shifting from Gaza to the northern border with Lebanon, where approximately 60,000 Israelis have been evacuated, marking the beginning of a “new phase” in the conflict.
Oil market analysts have cautioned that a full-scale war between Israel and Hezbollah could lead to direct intervention by Iran, an OPEC member, potentially disrupting Middle East crude oil supplies.
Helena Croft, head of global commodity strategy at RBC Capital Markets, highlighted in a client note that Lebanon could be the primary route for oil disruption due to direct Iranian involvement in a broader regional conflict.