KEY POINTS
- Oil prices rose nearly 2% on supply concerns in the Middle East.
- Israel’s strikes on Gaza and Lebanon intensified, worrying markets.
- China’s slow economic growth adds to concerns about weak oil demand.
Oil prices closed nearly 2% higher on Monday, partially reversing last week’s more than 7% drop as the ongoing turmoil in the Middle East and the potential for Israeli retaliation against Iran fueled concerns over regional supply disruptions.
Oil prices recover after steep losses amid Middle East turmoil
U.S. West Texas Intermediate (WTI) crude futures rose $1.34, or 1.94%, to $70.56 per barrel, while Brent crude futures climbed $1.23, or 1.68%, to $74.29 per barrel. Last week marked the steepest weekly declines since early September, with Brent falling over 7% and WTI down 8%, driven by slower economic growth in China and reduced geopolitical risk premiums in the Middle East.
On Monday, Israeli forces intensified attacks on Palestinian militants in northern Gaza, targeting hospitals and shelters, while also striking Hezbollah-linked sites in Lebanon. U.S. envoy Amos Hochstein is set to meet with Lebanese officials to discuss a potential truce between Israel and Hezbollah, and U.S. Secretary of State Antony Blinken will visit the Middle East to push for a ceasefire.
“Crude futures are rising as fighting escalates in the Middle East and Israel prepares for possible strikes on Iran,” said Dennis Kissler, senior vice president of trading at BOK Financial. He noted that the recent oil sell-off was largely due to long liquidation as the market balances declining demand and regional unrest.
China’s weak economic growth raises concerns about oil demand
China, meanwhile, lowered its benchmark lending rates on Monday as part of broader stimulus measures aimed at reviving its economy. However, third-quarter data showed China’s slowest economic growth since early 2023, raising concerns about weak oil demand. The International Energy Agency (IEA) warned that slower growth and the electrification of China’s car fleet could further limit oil demand in 2025. Despite this, Saudi Aramco’s CEO remained optimistic, citing strong demand for petrochemicals and jet fuel.
In the U.S., Minneapolis Federal Reserve President Neel Kashkari reiterated expectations for “modest” interest rate cuts in the coming quarters. Lower interest rates typically spur economic activity and may boost oil demand.
The U.S. Energy Information Administration reported that oil production reached a record 13.5 million barrels per day for the week ending October 11, up 100,000 barrels per day, according to Reuters. A preliminary Reuters poll on Monday indicated U.S. crude inventories likely rose by about 100,000 barrels last week, while gasoline and distillate inventories were expected to decline.
