Oil prices rebounded following a near 8% drop last week, driven by concerns over supply disruptions from escalating tensions in the Middle East, as well as China’s continued efforts to stimulate its economy.
Global benchmark Brent crude rose to nearly $74 a barrel, while West Texas Intermediate (WTI) topped $70. The price surge comes in the wake of a Hezbollah drone attack on Saturday, which exploded near Israeli Prime Minister Benjamin Netanyahu’s private residence. The following day, Israel launched a fresh military assault targeting Hezbollah strongholds in Lebanon. Israel has also vowed to retaliate against Iran for a missile attack at the beginning of October.
“WTI crude oil futures fell by 2% to $69.2, and Brent crude oil futures declined by 1.9% to $73, marking their steepest weekly losses since early September, with both dropping over 8%. The downturn was attributed to reduced demand forecasts from OPEC and the International Energy Agency (IEA), China’s slowing economic growth, and signs of easing geopolitical tensions in the Middle East. Both OPEC and the IEA have revised their demand forecasts downward for 2024 and 2025,” said Saxo Bank’s APAC Research Team.
In the meantime, China, the world’s largest oil importer, took steps to bolster its economic recovery by cutting its benchmark lending rates on Monday. This move follows the central bank’s interest rate reduction at the end of September, part of a broader set of measures aimed at reigniting growth. Saudi Aramco CEO Amin H. Nasser expressed optimism about the nation’s oil demand during remarks in Singapore, citing strong consumption prospects.
The oil market has experienced volatility this month, with traders weighing the risks of supply disruptions from the Middle East against signs of soft demand from China. The International Energy Agency (IEA) has raised concerns that rising global oil supplies could lead to a surplus next year, as OPEC+ plans to gradually restore some of the production capacity it had previously shut down, starting in December.
Despite these uncertainties, traders remain cautious. Bullish call options continue to command a premium over bearish puts, and weekly call option volumes on the global Brent benchmark reached the second-largest on record last week.
