Crude oil prices hit one-week highs on Monday, amid escalating tensions in the Middle East and a weak US dollar.
Los crude oil prices rose on the Asian stock markets this weekend due to the escalation of conflict in the Middle East. At 7:00 a.m. (European time), Brent futures had risen 0.66% to $79.54 per barrel, and WTI futures had risen 0.68% to $75.34 per barrel. .
Escalation of the conflict in the Middle East
On Sunday, Israel admitted launching preemptive strikes against southern Lebanon to thwart an attack by the Lebanese Islamist group Hezbollah. Hezbollah claimed that it had still managed to launch hundreds of rockets and drones into Israel, in retaliation for the murder of its top leader in July.
The military confrontation has raised fears of broader conflict in the Middle Eastespecially due to the current tensions between Iran and Israel. Fears of oil supply disruptions have boosted markets as the conflict could lead to additional Western sanctions against Iran.
According to ‘Reuters’, no agreement has been reached during talks on a possible ceasefire in Gaza. At the meeting, held this Sunday in Cairo (Egypt), neither Hamas nor Israel accepted the proposed compromises.
The talks, backed by the US, aimed to end the conflict between Hamas and Israel, which sparked 10 months ago, after the attack on October 7 last year. Sunday’s attacks are an example of the failure of negotiations. Oil prices are expected to continue rising in response to escalating tensions in the Middle East.
The price of oil could continue to rise
The US dollar weakened significantly against other major G-10 currencies following the Jackson Hole Symposium on Friday. US Federal Reserve Chairman Jerome Powell warned of a likely rate cut in September, which was perceived as a fundamental change in monetary policy.
The dollar is expected to continue its downward trend due to this change, which could encourage a new rebound in oil prices. Other central banks, such as the European Central Bank and the Bank of England, have hinted at further rate cuts for the remainder of the year.
The relaxation of monetary policies could stimulate economic growth in these large economies, thus optimizing the outlook for global demand.
Concern over supply shortages
Oil markets rose more than 4% in the first week of August, in a context of increase in demand and intensification of tensionsfollowing Iran’s promise to retaliate for the assassination of a Hamas leader.
However, oil prices fell sharply in mid-August due to disappointing economic data from china and the signs of relaxation of tensions in the Middle East. This weekend’s rally could spark a rally in oil markets.
Data from the US Energy Information Administration (EIA) revealed that oil inventories fell by 4.65 million barrels in the week ending August 16, compared to the planned reduction of 2 million barrels. The decline in stocks resumed following the previous week’s increase, after six consecutive weekly declines through August 2.
According to the EIA, it is expected that OPEC+ production cuts reduce global oil inventories over the next three quarters, which could push up crude oil prices.
In June, OPEC and its allies agreed extend production cuts of 3.66 million barrels per day until the end of 2025, with additional voluntary cuts of 2.2 million barrels per day until September of this year.
The organization, which represents more than 37% of the world’s oil supply, has been reducing production since 2022, with a total cut of 5.86 million barrels per day, which represents the 5.7% of global demand.
