Oil Prices Climb to Three-Week High

By Scott DiSavino

(Reuters) – Oil prices climbed about 2% to a three-week high on Tuesday due to monetary stimulus news from China, the world’s top crude importer, and concerns that increasing conflict in the Middle East could disrupt regional supply.

Oil markets gave up some earlier gains as it became clearer that a hurricane threatening the U.S. Gulf Coast later this week would likely miss most offshore oil and natural gas producing regions and primarily impact Florida, which accounts for 15% of the country’s oil and 2% of natural gas production.

Brent futures rose $1.27, or 1.7%, settling at $75.17 a barrel, while U.S. West Texas Intermediate (WTI) crude increased $1.19, or 1.7%, to settle at $71.56. This marked the highest close for Brent since September 2.

Claudio Galimberti, global market analysis director at Rystad Energy, noted that “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.”

China’s central bank unveiled its largest stimulus since the COVID-19 pandemic in an attempt to revitalize the economy and meet growth targets; however, analysts emphasized that additional fiscal support would be essential to achieve these goals.

In the Middle East, an Israeli airstrike in Beirut killed a senior Hezbollah commander amid escalating cross-border rocket attacks, raising fears of a full-scale war in the region. The situation risks drawing Iran, an OPEC member, deeper into conflict with Israel, as it supports Hezbollah.

OPEC revised its medium- and long-term oil demand forecasts upward in its annual outlook, attributing the growth to India, Africa, and the Middle East, and slower transitions to electric vehicles and cleaner fuels.

In the U.S., the world’s largest oil consumer and producer, several energy firms paused production despite Tropical Storm Helene being expected to miss much of the Gulf’s production areas, instead affecting the Florida Panhandle as a major hurricane later in the week. Some companies, like Shell, began to restore oil production as storm forecasts shifted away from their offshore platforms.

Another factor contributing to earlier oil price gains being curtailed was a drop in U.S. consumer confidence, the largest decline in three years for September, amid rising labor market concerns.

U.S. Oil Inventories

Weekly U.S. oil storage data from the American Petroleum Institute (API) is expected later on Tuesday, with the U.S. Energy Information Administration (EIA) reporting on Wednesday. Analysts estimate that U.S. energy firms pulled about 1.2 million barrels of crude out of storage during the week ending September 20. If accurate, this would mark the fifth decline in six weeks for U.S. crude stocks, and would be compared to a withdrawal of 2.2 million barrels during the same week last year, with an average decrease of 1.0 million barrels over the past five years (2019-2023).