Oil prices climbed about 2% to a three-week high on Tuesday on news of monetary stimulus from China, the world’s top importer, and concerns that conflict in the Middle East could hit regional supply while another hurricane threatened supply in the U.S., the world’s biggest crude producer.
Brent futures were up $1.14, or 1.5%, to $75.04 a barrel by 11:09 a.m. EDT (1509 GMT), while U.S. West Texas Intermediate (WTI) crude rose $1.16, or 1.7%, to $71.53.
That put Brent on track for its highest close since Sept. 2.
“The Chinese government’s announcement of its largest stimulus package since the pandemic, combined with the sudden rise of geopolitical tension in the Middle East … has dealt a blow to the bearish sentiment that dominated the oil markets in the past three weeks,” Claudio Galimberti, global market analysis director at Rystad Energy, said in a note.
China’s central bank unveiled its biggest stimulus since the COVID-19 pandemic to pull the economy out of its deflationary funk and back towards the government’s growth target, but analysts warned more fiscal help was vital to hit these goals.
Oil edges higher on Middle East tensions, storm worries
In the Middle East, a key oil-producing region, an Israeli airstrike on the southern suburbs of Beirut killed a Hezbollah commander as fears of a full-fledged war in the region mounted.
The strikes risk pulling Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), closer to a conflict with Israel. Iran supports the Lebanese group.
“The Israeli military chief stated that attacks on Hezbollah would continue to accelerate. This has struck new fears of the possibility an all-out war in the Middle East, which could completely destabilize the region,” said Alex Hodes, an oil analyst at brokerage StoneX.
Jake Sullivan, the White House national security adviser, said U.S. President Joe Biden is determined to bring about a Gaza ceasefire and hostage deal with the Palestinian group Hamas while also seeking to de-escalate tensions on Israel’s border with Lebanon.
U.S. oil producers, meanwhile, were scrambling to evacuate staff from oil production platforms in the Gulf of Mexico as a second hurricane in two weeks could tear through offshore oilfields.
Several oil companies paused some of their production even though Tropical Storm Helene is currently on track to miss most of the producing regions in the western and central Gulf of Mexico and hit the Florida Panhandle as a hurricane late on Thursday.
U.S. oil inventories
Weekly U.S. oil storage data is due from the American Petroleum Institute (API) trade group later on Tuesday and the U.S. Energy Information Administration (EIA) on Wednesday.
Analysts projected U.S. energy firms pulled about 1.2 million barrels of crude out of storage during the week ended Sept. 20.
If correct, that would be the fifth time in six weeks that U.S. crude stocks have declined and compares with a withdrawal of 2.2 million barrels during the same week last year and an average decrease of 1.0 million barrels over the past five years (2019-2023).
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