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OIL: Crude Rallies On China Rate Cut And Rising Geopolitical Tensions

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Oil prices are higher today after range trading on Friday driven by escalating geopolitical tensions in the Middle East and China’s 10bp reduction in the 14-day repo rate. WTI rose 0.9% to $71.61/bbl, close to the intraday high, and Brent is up 0.8% to $75.06. The USD index is little changed.

  • Oil markets have been concerned about the outlook for China’s economy for some time, as the country is the world’s largest oil importer. Today’s rate cut has buoyed the market though as it signals that the authorities may be prepared to stimulate demand. The Fed’s 50bp rate cut last week may also open the door.
  • Israel targeted rocket launchers in southern Lebanon over the weekend after striking Hezbollah leadership in Beirut. Hezbollah fired around 150 rockets and missiles into Israel. The UN has counselled both sides to step back from the brink. Iran supports Hezbollah and there could be risks to oil markets if it were to become more involved in the conflict.
  • Later the Fed’s Bostic, Goolsbee and Kashkari speak and preliminary September US/European PMIs are released.

 

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Oil prices are higher today after range trading on Friday driven by escalating geopolitical tensions in the Middle East and China’s 10bp reduction in the 14-day repo rate. WTI rose 0.9% to $71.61/bbl, close to the intraday high, and Brent is up 0.8% to $75.06. The USD index is little changed.

  • Oil markets have been concerned about the outlook for China’s economy for some time, as the country is the world’s largest oil importer. Today’s rate cut has buoyed the market though as it signals that the authorities may be prepared to stimulate demand. The Fed’s 50bp rate cut last week may also open the door.
  • Israel targeted rocket launchers in southern Lebanon over the weekend after striking Hezbollah leadership in Beirut. Hezbollah fired around 150 rockets and missiles into Israel. The UN has counselled both sides to step back from the brink. Iran supports Hezbollah and there could be risks to oil markets if it were to become more involved in the conflict.
  • Later the Fed’s Bostic, Goolsbee and Kashkari speak and preliminary September US/European PMIs are released.