Oil prices climbed about 2 per cent to a three-week high on Tuesday on news of monetary stimulus from China, the world’s top crude importer, and amid concerns that growing conflict in the Middle East could hit regional supply.
Oil markets gave up some earlier gains as it became more clear that a hurricane threatening the U.S. Gulf Coast later this week would likely miss most offshore oil and natural gas producing regions and hit Florida. The region accounts for 15 per cent of the country’s oil and 2 per cent of natural gas production.
Brent futures rose $1.27, or 1.7 per cent, to settle at $75.17 a barrel, while U.S. West Texas Intermediate (WTI) crude rose $1.19, or 1.7 per cent, to settle at $71.56.
That was the highest close for Brent since Sept. 2.
“The Chinese government’s announcement of its largest stimulus package since the pandemic, combined with the sudden rise of geopolitical tension in the Middle East … has dealt a blow to the bearish sentiment that dominated the oil markets in the past three weeks,” Claudio Galimberti, global market analysis director at Rystad Energy, said in a note.
China’s central bank unveiled its biggest stimulus since the COVID-19 pandemic to pull the economy out of its deflationary funk and back toward the government’s growth target, but analysts warned more fiscal help was vital to hit these goals.
In the Middle East, a key oil-producing region, an Israeli air strike on Beirut killed a senior Hezbollah commander as cross-border rocket attacks by both sides increased fears of a full-fledged war in the region.
The strikes risk pulling Iran, a member of the Organization of the Petroleum Exporting Countries, closer to a conflict with Israel. Iran supports the Lebanese militant group.
OPEC, meanwhile, raised its forecasts for world oil demand for the medium and long term in an annual outlook, citing growth led by India, Africa and the Middle East and a slower shift to electric vehicles and cleaner fuels.
In the U.S., the world’s biggest oil consumer and producer, several energy firms paused some production even though Tropical Storm Helene was currently expected to miss most of the producing regions in the western and central Gulf of Mexico and hit the Florida Panhandle as a major hurricane late Thursday.
But some firms, like Shell, started the process of restoring oil production as the storm forecasts shifted away from their offshore platforms.
Another factor that helped pare earlier oil price gains was news of a drop in U.S. consumer confidence by the most in three years in September amid mounting fears over the labour market.
Weekly U.S. oil storage data is due from the American Petroleum Institute (API) trade group later on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday.
Analysts projected U.S. energy firms pulled about 1.2 million barrels of crude out of storage during the week ended Sept. 20.
If correct, that would be the fifth time in six weeks that U.S. crude stocks have declined and compares with a withdrawal of 2.2 million barrels during the same week last year and an average decrease of 1.0 million barrels over the past five years (2019-2023).