Oil gained — after losing almost 8% last week — as traders tracked tensions in the Middle East that pose a potential threat to supplies, and China moved to beef up aid for the economy in the largest importer.
Global benchmark Brent rose above $73 a barrel, while West Texas Intermediate was near $70. On Saturday, a Hezbollah drone exploded next to Prime Minister Benjamin Netanyahu’s private home, and the following day Israel opened up a fresh military assault on the group’s strongholds in Lebanon. Israel has already vowed to retaliate against Iran for a missile attack at the start of October.
In Asia, China cut its benchmark lending rates on Monday after the central bank lowered interest rates at the end of September as part of a series of measures to revive growth. Speaking in Singapore, Saudi Aramco Chief Executive Officer Amin H. Nasser said he is bullish about the nation’s consumption.
Crude has had a volatile month, with traders balancing risks to flows from the Middle East — where Israel is facing off with Tehran and its proxies — against signs of soft demand in China. At the same time, the International Energy Agency has said rising global supplies could lead to a surplus next year, with OPEC+ set to restore some shuttered capacity in stages from December.
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“If we don’t see a major escalation of the situation in the Middle East, I still expect the oil prices will be further under pressure because we are entering a period, including next year, of more comfortable markets,” Fatih Birol, head of the IEA, told Bloomberg Television on Monday. He cited factors including the rapid growth of output in the Americas.
In Israel, Prime Minister Netanyahu — who’s already vowed to retaliate against Iran for the early October missile attack — held meetings with top aides to discuss his nation’s next strikes on Tehran. Late Friday, US President Joe Biden hinted he had details on Israel’s plans, but stopped short of revealing what they were, having made the case before for not hitting energy infrastructure.
“It looks like the market has discounted the probability of Israel mounting an Iranian attack before the Nov. 5 US election, at the very least,” said Vandana Hari, founder of energy-markets analysis unit Vanda Insights, referring to the presidential contest. “I expect range-bound trading.”
While Middle East tensions remain elevated, Brent’s metrics point to physical conditions becoming less tight. The crude benchmark’s three-month spread has narrowed to 90 cents a barrel in backwardation, down from $1.61 about one month ago, and well below levels that were above $2 three months back.
