Oil prices rise amid optimism about Chinese demand

Oil prices rose on Monday, recouping some of last week’s drop of more than 7 percent due to concerns about demand in China, the world’s largest oil importer, and easing concerns about potential supply disruptions in the Middle East.

Brent crude futures rose $1.16, or 1.6%, to $74.22 a barrel. U.S. West Texas Intermediate crude futures rose $1.32, or 1.9%, to $70.54 a barrel.

Brent crude settled down more than 7% last week, while WTI lost about 8%. It was the biggest weekly decline of contracts since Sept. 2, due to slowing economic growth in China and lower risk premiums in the Middle East.

China on Monday cut record lending rates as expected, as part of a broader package of stimulus measures to revive the economy.

China’s economy grew at its slowest pace since early 2023 in the third quarter, data showed on Friday, raising growing concerns about oil demand.

Oil prices fall, on track for 8% weekly decline due to demand problems in China Saudi Aramco’s chief executive told an energy conference in Singapore on Monday that he remains “somewhat optimistic” about Chinese oil demand in light of intensified political support aimed at boosting growth, and because of the growing demand for jet fuel and chemical liquids.

UBS analyst Giovanni Stonovo said: “Geopolitical tensions in the Middle East and positive comments on oil demand from Aramco’s CEO are likely to support oil prices.”

The U.S. Energy Information Administration said on Friday that weekly oilfield production rose by 100,000 barrels per day to a record 13.5 million barrels per day during the week ended Oct. 11.

Oil Rises as Market Focuses on Demand and Supply Concerns

Crude oil prices rose more than 1% on Monday after falling 7% last week as the market focused on demand concerns.

Oil prices fell sharply last week on concerns about demand from China, easing concerns about potential supply disruptions in the Middle East.

At the time of writing, WTI on the New York Mercantile Exchange was at $69.69 per barrel, up 1.5% from the previous close.

Brent crude on the Intercontinental Exchange was at $73.91 a barrel, up 1.2%. Traders resorted to buying deals after prices fell sharply last week.

Geopolitical premiums on oil prices fall

The risk premium on oil prices due to the ongoing conflict in the Middle East has fallen significantly over the past week.

After Iran attacked Israel on October 1, oil prices rose by more than 10%. Brent crude oil prices surpassed $80 a barrel for the first time since August.

While the Middle East is home to more than half of the world’s oil reserves, escalating tensions threaten supplies from the region.

However, the risk premium for oil prices subsequently decreased as reports claimed that Israel might avoid targeting Iranian oil facilities in response to the October 1 strikes.

Market focused on OPEC production

Experts believe the oil market is expected to focus on production by the Organization of the Petroleum Exporting Countries and its allies, with the group set to increase output from December. The market is now waiting for signals about whether this increase in production will actually be realized or whether it can be postponed again

If the cartel goes ahead with its plan to cancel some voluntary production cuts in December, oil prices could fall further. However, the announcement by OPEC and Saudi Arabia to postpone the increase may support bullish sentiment

Stocks Fall, Oil Rises on Assessment of Chinese Interest Cuts

Major stock markets fell on Monday and oil prices jumped as traders assessed new interest rate cuts from China’s central bank aimed at reigniting the world’s second-largest economy.

Another record session on Friday on Wall Street failed to inspire a similar rally elsewhere, as major stock indexes in Europe and Asia started the week lower. However, Shanghai rose.

Oil prices, which fell more than eight percent last week, have also been buoyed by turmoil in the Middle East, as well as hopes of increased demand from China, the world’s largest crude importer. Susanna Streeter, head of finance and markets at Hargreaves Lansdown, said: “The idea is that the move (on Chinese interest rates) will encourage lending and spending and help fix the ailing real estate market.

China’s central bank said on Monday it had cut two key interest rates to all-time lows as part of the authorities’ drive to revive spending and meet its annual economic growth target of five percent.

The move comes after figures last week showed China’s economy expanded at the slowest quarterly pace since the start of 2023, but is still better than expected.

Since last month, Beijing has unveiled a raft of measures to revive the economy, including cutting interest rates, easing rules on home purchases and pledges to support stock markets. These announcements inspired a massive rally in mainland and Hong Kong stocks, but some of these gains were erased after a series of disappointing press conferences that failed to provide any meaningful details or measures.

Data on Monday showed producer prices in Germany fell 1.4 percent year-on-year in September, reinforcing analysts’ expectations that the European Central Bank will cut interest rates again in December.

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