Oil prices are rising slightly today after the poor performance from last week through both Brent and West Texas Intermediate benchmarks, which rose by 0.45% and 0.4%, respectively, after reaching their lowest levels a month ago.
Oil’s gains come after the unexpected cut in interest rates in China, a move that the People’s Bank of China aims to provide support to the real economy, which in turn may slightly reduce concerns about demand for crude by its largest importers.
The Chinese Central Bank reduced the one-year loan prime rate from 3.45% to 3.35%, and the five-year loan prime rate from 3.95% to 3.85%.
It also reduced the seven-day reverse repo rate from 1.80% to 1.70%.
This surprise rate cut came after mixed economic performance. Although industrial production continues to grow, led by advanced industries, consumer confidence is very low and house prices continue to shrink unabated.
Far away in the Middle East, fears of the conflict expanding beyond the borders of Gaza constitute the key supporting factor for oil prices at the geopolitical level. The developments there on the ground do not show any direction towards but escalation on the various fronts of the region, and this may keep concerns about the safety of oil supplies in the region in mind.
The negotiations regarding the ceasefire in Gaza did not lead to any tangible progress. Instead, it witnessed a stumble with the Israeli delegation not participating in the late-negotiations last week, according to Politico. However, US Secretary of State, Antony Blinken, had spoken that a ceasefire agreement was very close, “within the 10-yard line,” according to The New York Times.
As we know, as the horizon of war in Gaza extends in time, the specter of a broad regional war remains, and the regional war chapters materialize from time to time across various fronts. Last week, for example, we witnessed unprecedented mutual attacks between Yemen and Israel.
This week will host a set of key data for energy markets, which will help determine the state of economic activity, whether in the United States or the Eurozone.
As we await the advanced reading of the gross domestic product for the second quarter in the US, in addition to the June reading of the core Personal Consumption Expenditures Price Index (core PCE), which is the Federal Reserve’s preferred gauge for tracking inflation.
As for the Eurozone, we are waiting for the flash reading of the manufacturing and services PMIs from S&P Global, which will help describe the reality of economic activities there, which have returned to more contraction in general, which has strengthened concerns about demand for crude.
Leave a Comment