Oil prices rose again on Tuesday, with Brent crude hitting $75 per barrel as markets reacted to China's latest economic stimulus measures and concerns over potential supply disruptions from ongoing tensions in the Middle East. Investors are weighing the effects of a possible ceasefire in the Gaza conflict alongside China's efforts to reignite its economy, both of which are driving crude prices higher after last week's selloff.
Brent crude futures for December delivery increased by 68 cents, or 0.92%, to reach $74.97 per barrel by mid-morning in Europe. Similarly, U.S. West Texas Intermediate (WTI) crude futures for November delivery rose by 66 cents to $71.22 per barrel. The WTI December contract, which will soon become the front month, climbed by 70 cents, or 1%, to $70.74 per barrel. Both benchmarks had risen by nearly 2% on Monday, recovering some ground after last week's 7% drop amid fears that Israel's retaliation against Iran could disrupt oil supplies from the region.
The oil market continues to grapple with uncertainty, driven by the conflict in the Middle East and its potential to spill over into oil-producing nations. On Tuesday, U.S. Secretary of State Antony Blinken arrived in Israel in an attempt to de-escalate tensions and push for ceasefire talks to end the Gaza war. The market has been fluctuating as investors digest updates from the region, with analysts closely monitoring the risk of the conflict expanding to Lebanon and other areas that could impact global oil supplies.
"Crude oil prices have been fluctuating in response to mixed news from the Middle East, as the situation alternates between escalation and de-escalation," said Satoru Yoshida, a commodity analyst at Rakuten Securities. Yoshida emphasized that although immediate threats to oil production have not materialized, the possibility of supply disruptions remains a key concern for traders.
Adding to the complex dynamics, China's latest stimulus measures are expected to influence oil demand in the coming months. On Monday, the Chinese government cut benchmark lending rates in an effort to revive economic growth, which had slowed to its weakest pace since early 2023 during the third quarter. China's economy is a major driver of global oil consumption, and its faltering performance has raised concerns about weaker demand for crude. However, the new stimulus measures have provided some relief to the market, as investors anticipate a rebound in demand from the world's second-largest economy.
While China's oil demand is expected to slow over the longer term as the country transitions to electric vehicles and a more sustainable growth model, some industry leaders remain optimistic about short-term prospects. Saudi Aramco, the world's largest oil producer, expressed confidence in China's energy consumption in light of the government's efforts to stimulate growth. "We remain fairly bullish on China's oil demand," said a representative of the state-owned oil giant, pointing to the impact of stimulus packages that aim to accelerate economic activity.
Despite China's economic challenges, oil market participants continue to focus on the broader supply-and-demand picture. In the United States, crude oil stockpiles are expected to have increased last week, according to a preliminary Reuters poll. At the same time, distillate and gasoline inventories are anticipated to have declined, indicating robust fuel consumption in the domestic market.
Tuesday's market data reinforced the rebound in oil prices after last week's steep decline. By mid-morning, the WTI November contract traded at $71.22 per barrel, marking a 0.94% increase, while Brent's December contract was priced at $74.85 per barrel, up 56 cents or 0.75%. Year-to-date, U.S. crude prices have fallen slightly, while Brent crude has seen a nearly 3% drop. The outlook for oil prices remains uncertain as geopolitical risks persist, and global demand growth fluctuates.
Gasoline prices also saw modest gains, with the RBOB Gasoline November contract rising by 0.97% to $2.0342 per gallon. Natural gas futures inched up by 0.26% to $2.318 per thousand cubic feet, though natural gas prices remain down nearly 8% for the year.
