Oil prices rebounded on Monday, regaining some of the losses from last week's steep sell-off as investors responded to China's economic stimulus measures and easing concerns over potential supply disruptions in the Middle East. Brent crude futures rose by $1.05, or 1.4%, to $74.11 per barrel, while U.S. West Texas Intermediate (WTI) crude climbed $1.21, or 1.8%, to $70.43 per barrel by midday trading in London. Last week, Brent fell by more than 7%, while WTI declined by around 8%, marking the contracts' largest weekly losses since early September.
The recovery in oil prices came after China, the world's top oil importer, cut its benchmark lending rates on Monday as part of a broader package of stimulus measures designed to revive its sluggish economy. Data released on Friday showed that China's economy grew at its slowest pace since early 2023 during the third quarter, sparking concerns about a slowdown in oil demand. However, the rate cuts and other policy interventions have fueled optimism that demand from China may see some improvement.
Saudi Aramco's CEO, Amin Nasser, expressed confidence in China's oil demand during an energy conference in Singapore, stating that he remained "fairly bullish" on the country's appetite for oil, particularly with the recent policy support aimed at boosting growth and the rising demand for jet fuel and liquid-to-chemicals. "We see strong recovery signs, particularly in jet fuel demand, which is positive for overall oil consumption," Nasser said.
UBS analyst Giovanni Staunovo also noted that "geopolitical tensions in the Middle East and the positive oil demand comments from the CEO of Aramco are likely supporting oil prices." Last week, oil prices experienced significant declines as traders discounted the likelihood of a major supply disruption due to the ongoing conflict between Israel and Hezbollah, as well as Iran's involvement in the broader regional tensions. However, with the introduction of China's stimulus measures, market focus has shifted back to the fundamentals of supply and demand.
Adding to the price recovery, the U.S. Energy Information Administration (EIA) reported on Friday that U.S. weekly oilfield production rose by 100,000 barrels per day to a record 13.5 million barrels per day during the week ending on October 11. This increase in production, along with the prospect of higher supplies from OPEC nations as they prepare to bring more barrels back to the market in December, is expected to have an impact on global supply levels.
Monday's energy prices showed the U.S. benchmark WTI crude for November delivery at $70.82 per barrel, an increase of $1.60, or more than 2%. Brent crude for December delivery was trading at $74.50 per barrel, up by $1.44, or 2%. Year-to-date, WTI has seen a modest decline of around 1%, while Brent crude has declined by over 3%. Other energy products also saw gains on Monday, with RBOB gasoline rising 2.1% to $2.043 per gallon and natural gas increasing by 3% to $2.326 per thousand cubic feet.
Market analysts point to the recent decision by China to cut interest rates as a positive signal that could help support demand in the world's second-largest economy, which has faced headwinds from slower-than-expected growth. "The move by China to cut its benchmark lending rates shows that Beijing is committed to reviving its economy," said Staunovo, adding that the measures could help stimulate industrial activity and, by extension, support energy consumption.
The oil market remains sensitive to ongoing geopolitical risks, particularly in the Middle East, where Israel has expanded its air campaign against Hezbollah's financial network in Lebanon. Over the weekend, the Israeli military targeted Al-Qard Al-Hassan Association, which it described as Hezbollah's de facto financial arm, leading to fears of a broader escalation in the region. The United States has also sent a new missile defense system to Israel, along with approximately 100 American troops, as part of efforts to help Israel defend against potential missile threats.
In addition to geopolitical risks, market participants are closely watching supply and demand fundamentals, with Morgan Stanley forecasting a surplus of 1.3 million barrels per day in 2025 as demand in China softens and OPEC increases production. "The anticipated surplus in the global oil market is likely to weigh on prices going forward," said a Morgan Stanley analyst, noting that the surplus will be driven by a combination of increased OPEC output and sustained high production levels from the United States.
Despite the gains on Monday, concerns remain about the broader health of the global economy and its impact on oil consumption. China's slowing economic growth has weighed heavily on market sentiment, and there are fears that the country may continue to face economic challenges despite recent stimulus measures. Analysts are also cautious about potential supply chain disruptions, especially if the conflict in the Middle East escalates or if there are new developments involving Iran's nuclear ambitions.
Nevertheless, the broader sentiment in the oil market appears to have shifted towards a more optimistic outlook. "With China stepping in to support its economy and with a continued recovery in jet fuel demand, the market is seeing some reasons for optimism," Staunovo said. "However, the ongoing conflict in the Middle East remains a key wildcard that could either support prices further or add downward pressure, depending on how the situation evolves."
