Oil Prices Rises as Middle East Ceasefire Talks Fail
Oil prices increase early on Monday following US Fed rate cut expectation and Israeli strike on Hezbollah. In the global commodities market, prices of crude oil have been swinging both ways as tensions in the Middle East continue impacts market direction.
ICE Brent crude rose 0.73% to $78.72 per barrel. US benchmark West Texas Intermediate (WTI) increased by 0.82% to $75.44 per barrel, after closing at $74.83 in the prior session.
On Friday, US Federal Reserve Chair Jerome Powell signaled an interest rate cut at the central bank’s upcoming meeting in September.
In a market wide experience. Commodities prices increased after Powell’s much-anticipated speech at the annual Jackson Hole symposium in the US state of Wyoming.
A reduction in interest rates in the US, the world’s largest oil consuming country, is expected to increase economic activity and raise oil demand.
Fed Chair Powell said his confidence has grown that inflation is on a sustainable path back to 2%, saying ‘time has come’ for an adjustment in monetary policy.
‘The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks,’ he told the annual Jackson Hole symposium.
He added that overall, the economy continues to grow at a solid pace. Analysts are certain that the Fed will cut interest rates by 25 basis points next month, while the possibility of a 50 basis point cut is also on the table.
Meanwhile, the unsuccessful cease-fire negotiations in the Middle East, home to a vast majority of global oil reserves, contributed to price increases and heightened supply concerns among market players.
Despite international ceasefire negotiations, Israel hasn’t slowed its attacks on the blockaded Gaza Strip. Since Oct. 7, 2023, the Israeli onslaught has resulted in over 40,400 Palestinian deaths, mostly women and children, and over 93,000 injuries, according to local health authorities.
The latest round of cease-fire talks ended in Cairo on Sunday without an agreement. The Palestinian group Hamas demanded Israel adhere to what was agreed upon on July 2, in accordance with a proposal by US President Joe Biden laid out on May 31 and a UN Security Council resolution.
Oil settled marginally lower last week, despite a strong end to the week. ICE Brent settled more than 2.3% higher on Friday, following Fed Chair Powell’s speech at Jackson Hole, where he said that the “time has come” to cut interest rates.
The focus now for the market is whether the Fed will cut by 25bp or 50bp at its September meeting, ING commodities strategists said in a note on Monday.
They noted that the upcoming jobs report will likely influence the size of the cut. The strength in the market on Friday has carried through to early morning trading today.
A preemptive Israeli strike on Hezbollah over the weekend has raised concern about the Middle East once again.
“We would expect any rally on the back of these developments to be rather short-lived except if Iran were to become more directly involved, as this would raise oil supply risks more meaningfully”. #Oil Prices Rises as Middle East Ceasefire Talks Fail
