Oil prices bounce back after steep decline on China's move to boost its economy

Live updates: Follow the latest on Israel-Gaza Oil prices were up nearly 2 per cent on Monday, recovering from a steep drop last week that was fuelled by China's efforts to boost its sluggish economy and by heightened tensions in the Middle East . Brent , the benchmark for two thirds of the world's oil, was up 1.93 per cent at $74.47 a barrel at 3.23pm UAE time. West Texas Intermediate, the gauge that tracks US crude, was trading 2.28 per cent higher at $70.80 a barrel. Crude prices recorded their biggest weekly loss in more than a month last week on a weakening crude demand outlook and reduced possibility of supply disruption in the Middle East Brent fell by more than 7 per cent, while WTI dropped by about 8 per cent – bringing the benchmarks' losses to nearly 12 per cent and 15 per cent, respectively, ever since the Israel-Gaza war broke out more than a year ago. Last week's drop was also the largest weekly decline since early September after the US reported weaker-than-expected jobs data in August, raising concerns about growth in the world's largest economy. On Monday, oil prices had support from the decision by China's central bank to reduce two key interest rates to historic lows in an effort to shore up spending and demand. The People's Bank of China slashed the one-year and five-year loan prime rate by 25 basis points, a move widely expected but more than the 20 basis points expected by analysts. Official data on Friday showed that the Chinese economy grew by 4.6 per cent in the third quarter, the slowest in six quarters. Also on Friday, Beijing unveiled a 300 billion yuan ($42.2 billion) funding programme for share purchases to boost equities. More than 20 listed companies had announced their intention to tap into the facility as of Monday. The moves have resulted in oil futures stabilising “to a certain extent” after last week’s sharp declines, but weak demand in China continues to weigh on market sentiment, Joseph Dahrieh, managing principal at brokerage Tickmill, wrote in a note on Monday. “China’s economic slowdown, now at its weakest growth rate since early 2023, continues to dampen expectations for a quick recovery in oil demand, despite Beijing’s continuing stimulus efforts. This has kept prices under pressure as investors monitor whether China can boost its demand,” he said. On Monday, Saudi Aramco chief executive Amin Nasser said in an energy conference in Singapore that the world's biggest oil-producing company is “fairly bullish” on Chinese demand, which is the world's second largest behind the US. Meanwhile, tensions in the Middle East remain high. Israel, which has been at war with Hamas in Gaza and Hezbollah in Lebanon, has also threatened to strike Iran. Eighteen people were killed in Israeli air attacks and shelling across Gaza on Monday, according to the official Wafa news agency. A large-scale regional conflict between Iran and Israel could significantly hinder gas exports and delay oil development projects, while attacks on key Iranian oil infrastructure would threaten nearly 1.4 million barrels per day of exports, Rystad Energy Middle East research director Aditya Saraswat said. Also, US envoy Amos Hochstein arrived in Beirut on Monday in the latest push for a ceasefire between Israel and Hezbollah, planning to hold talks on Israel's conditions for a diplomatic solution to end its war on Lebanon, Israeli media reported. “US President Joe Biden expressed his intention to negotiate with Israel and Iran to try to reduce tensions, which could bring temporary stability. However, the reality on the ground is different,” Antonio Di Giacomo a senior market analyst at XS.com, said in a note on Monday.<a href="https://are01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fu7061146.ct.sendgrid.net%2Fls%2Fclick%3Fupn%3Du001.gqh-2BaxUzlo7XKIuSly0rC9L-2B1E-2Bp7Vs1dle6Bjxz3Ss-3D1ftt_ZK3RKS72DnH-2FqBK8xOaqoVgIfCSEDj-2Ba-2BOkCUKUnQLb1L-2Bx9rTslyZMXCgt0G2tVdCBpzmK8hnbw4p0YLd5W-2B7EqWocpbcTumWsKynv8EIV9JrEdIzWJndNHVsFQ3S-2Bu3-2B65z3RaVZIE0IOQb8iMzQyDDxG4NrHShCgHsjwZ4J4T2RffN5x1uUCMN9HIIl3nwasFDVN1y88sTwTUjxKmkVz9B0wAJKbUTHoHnfBawMvdLUsCrTz-2BK4GNOyV92hlSQeDyngI8CdVzEBhg8emC9XahWsAbt0wXqUi05jZGevIL2LPe59ysQEn5UHr1TI1tJyAStAVwAWbLRmNjmjON3WLedFmZfiCuXtsAx1bFvow-3D&data=05%7C02%7Cacabral%40thenationalnews.com%7C812df208b57743a0b19808dcf19af4cb%7Ce52b6fadc5234ad692ce73ed77e9b253%7C0%7C0%7C638650895069902071%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C0%7C%7C%7C&sdata=bWifncLSlS%2FqrHaWzoiVo1mK3AA9j7RxBfjX8A04JB4%3D&reserved=0" target="_blank"> “Instability in the Middle East adds an unpredictable element that could lead to short- and medium-term price volatility. These factors force traders and analysts to remain cautious and attentive to any changes in these variables to understand how prices will behave.” This month, Opec lowered its forecast for global oil demand growth in 2024 and 2025 for the third consecutive month, but is optimistic that China’s stimulus plan to revive its economy will support crude consumption. The group lowered its oil demand growth forecast for this year by 106,000 barrels per day to 1.9 million bpd, citing slightly reduced expectations for crude consumption in several regions. Opec also revised its forecast for world oil demand growth for next year down by 102,000 bpd to 1.6 million bpd.

Oil prices bounce back after steep decline on China's move to boost its economy

Brent and WTI are both down more than 10% since the Israel-Gaza war broke out more than a year ago