Brent moves higher as geopolitical risks resurface
The front-month ICE Brent contract gained $1.96/bbl on the day from Friday, to trade at $79.89/bbl at 09.00 GMT.
PHOTO: An oil barrel. Getty Images
Upward pressure:
Brent’s price has risen close to $80/bbl as supply concerns from the Middle East have once again pushed the global oil market to the edge.
In one of the biggest drone attacks, noting a clear escalation of the ten-month-old Middle Eastern conflict, Iran-aligned Hezbollah armed group fired over 150 drones and missiles into the Israeli territory on Sunday, the Israeli Defense Forces (IDF) said in a statement.
This development has erased any further chances of a US-mediated ceasefire deal in the Gaza Strip, thereby putting some upward pressure on oil prices, analysts said.
“Developments in the Middle East over the weekend have provided further support to oil this morning,” two analysts from ING Bank noted.
Brent futures got another boost following Federal Reserve (Fed) chairman Jerome Powell’s speech at the annual Jackson Hole Economic Symposium in Wyoming last week. Oil prices moved higher as the global oil market grew optimistic after Powell reiterated the Fed’s trajectory of an interest rate cut at its next policy meeting in September.
Lower interest rates make dollar-denominated commodities like oil more affordable for holders of other currencies, thereby supporting demand growth.
“Fed Chair Powell’s comments at the Jackson Hole conference indicated that a September rate cut is coming,” analysts from Saxo Bank noted. “He did not close the door to a 50bps [50 basis points] cut either,” they added.
Downward pressure:
Some downward pressure on oil continues to come from a slowdown in demand growth in the world’s second-largest oil consumer – China.
Last month, oil consumption in China declined by 8% year-on-year to 13.55 million b/d, according to China’s General Administration of Customs (GACC).
Besides, concerns about a sluggish growth in the Chinese economy have capped Brent’s price gains in recent days, market analysts have noted.
By Aparupa Mazumder
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