Brent moves higher as tensions in the Middle East mount
The front-month ICE Brent contract gained $0.81/bbl on the day, to trade at $81.40/bbl at 09.00 GMT.
PHOTO: Oil pump jacks pictured at dusk. Getty Images
Upward pressure:
Brent’s price extended gains as geopolitical tension escalated in the Middle East after the assassination of a prominent leader from the Iran-aligned Hamas militant group in Tehran.
The news of Hamas leader Ismail Haniyeh’s death came immediately after a senior commander of the Lebanon-based Hezbollah militant group was killed in an Israeli missile strike in Beirut.
These developments have raised oil supply concerns in the region, analysts said. “Oil prices rallied yesterday as Middle East tensions grew over the assassination of Hamas’ political leader on a visit to Iran,” two analysts from ING Bank said.
“The region and oil market will now be on tenterhooks to see how and if Iran retaliates,” the analysts from ING Bank said.
Meanwhile, oil demand growth expectations got a boost after the US Energy Information Administration (EIA) reported a drop in US crude stocks. Commercial crude oil inventories in the US dropped by 3.44 million bbls to 433 million bbls in the week ending 26 July.
Brent's price found further support after the US Federal Reserve’s (Fed) chairman Jerome Powell affirmed that an interest rate cut in September is “on the table.”
“Data showing larger-than-expected US oil inventory drawdowns last week and the US Federal Reserve boosting market cheer by putting a September interest rate cut on the table also supported [Brent] crude’s gains,” VANDA Insights’ founder and analyst Vandana Hari noted.
Downward pressure:
Concerns about sluggish demand growth in China continued to build downward pressure on oil prices.
Official data from China’s National Bureau of Statistics (NBS) showed that manufacturing activity in the country contracted for a third consecutive month.
The manufacturing PMI came in at 49.4% in July, down from 49.5% in June, the NBS data showed.
“[Oil’s] monthly gains were limited by production uncertainties and weak Chinese demand,” analysts from Saxo Bank remarked.
By Aparupa Mazumder
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