Oil prices rose on Monday, paring last week’s loss, on fears of a widening conflict in the Middle East following a rocket strike in the Israeli-occupied Golan Heights, which Israel and the United States blamed on Lebanese armed group Hezbollah.
Brent crude futures gained 40 cents, or 0.5 per cent, to $81.53 a barrel at 0650 GMT. US West Texas Intermediate (WTI) crude futures climbed 34 cents, or 0.4 per cent, to $77.50 a barrel.
Last week, Brent lost 1.8 per cent while WTI fell 3.7 per cent on sagging Chinese demand and hopes of a Gaza ceasefire agreement.
On Sunday, Israel’s security cabinet authorised Prime Minister Benjamin Netanyahu’s government to decide on the “manner and timing” of a response to the Saturday’s rocket strike in the Golan Heights that killed 12 teenagers and children.
Iran-backed Hezbollah denied responsibility for the attack, the deadliest in Israel or Israeli-annexed territory since Palestinian militant group Hamas’ Oct. 7 assault sparked the war in Gaza. That conflict has spread to several fronts and risks spilling into a wider regional conflict.
Israel has vowed retaliation against Hezbollah in Lebanon, and Israeli jets hit targets in southern Lebanon on Sunday.
“Worries over escalating tensions in the Middle East prompted fresh buying, but gains were limited by lingering concerns of weakening demand in China,” said Toshitaka Tazawa, an analyst at Fujitomi Securities.
Over the past few weeks, hopes of a ceasefire in Gaza have been gaining momentum.
But Israel wants changes in a plan for a Gaza truce and the release of hostages by Hamas, complicating a deal to halt nine months of combat that have devastated the enclave, according to a Western official, a Palestinian and two Egyptian sources.
On the demand side, data released earlier this month showing that China’s total fuel oil imports dropped 11 per cent in the first half of 2024 have raised concern about the wider demand outlook in the Asian giant, the world’s biggest crude importer.
“Demand concerns remain a key factor that presses on crude oil prices. The economic growth slowed in China in the second quarter, while domestic consumer demand was sluggish,” said independent market analyst Tina Teng.
She added that the US Federal Reserve’s rate decision and China’s manufacturing PMI are the next key events for markets as they try to gauge the oil market trajectory.
Meanwhile, US energy firms last week added oil and natural gas rigs for a second week in a row, boosting the monthly count by the most since November 2022, energy services firm Baker Hughes (BKR.O) said in its closely followed report on Friday.
Markets are also keeping a watch on oil producer Venezuela, after the country’s electoral authority said President Nicolas Maduro had won a third term with 51 per cent of the vote despite multiple exit polls pointing to an opposition win.
US Secretary of State Antony Blinken said the US has serious concerns that the results do not reflect the votes of the people.
The US had previously said it would “calibrate” its sanctions policy towards Venezuela depending on how the high-stakes election unfolds in the OPEC nation.
