Oil rises as geopolitical tensions rise
Oil continued its rise for a second day on Israel’s rejection of a ceasefire proposal for the Gaza Strip and risk-on mood on tensions in the Middle East that helped lift broader financial markets.
Global benchmark Brent rose to $84 per barrel after a 0.5 percent rise on Monday, while US crude oil was close to $79. The Israeli war cabinet unanimously rejected the ceasefire offer accepted by Hamas. The Jewish state has promised to continue military operations in Rafah, one of Gaza’s major cities.
The rise in crude oil came as Asian stocks rose on Tuesday on optimism that the Fed will start cutting interest rates this year. Falling U.S. borrowing costs should be a plus for the country’s energy demand.
Oil is recovering somewhat after posting its worst weekly decline since February. Prices have remained high since the beginning of the year due to OPEC+ production cuts narrowing the market. While the cartel is expected to keep supply tight, the demand outlook is cloudy as diesel shows signs of weakness.
“The demand outlook continues to be supported by expectations for a Fed rate cut and the focus today will be on the EIA outlook report,” said Charu Chanana, an analyst at Saxo Capital Markets Pte in Singapore.
The Energy Information Administration (EIA) will release its Short-Term Energy Outlook later Tuesday, offering clues to the outlook including the pace of U.S. supply growth. Additional comments could come from oil giants BP Plc and Saudi Arabian Oil Co., also known as Aramco, as they report earnings.