Oil prices rose on Monday, building upon a rebound from the previous session. This uptick was driven by media reports indicating no progress in negotiations towards a ceasefire between Israel and Hamas, as hostilities in the region continued.
Oil markets also received a boost from optimism surrounding the prospect of lower U.S. interest rates. Comments from Federal Reserve Chair Jerome Powell had cemented expectations for a rate cut in September, which fueled this optimism. Oil had already rebounded on Friday following Powell’s remarks.
Brent oil futures for October delivery advanced 0.8 percent to reach $79.59 per barrel, while West Texas Intermediate crude futures climbed 0.6 percent to $75.45 per barrel by 21:01 ET (01:01 GMT).
While U.S. officials described the talks as constructive, the apparent lack of an accord undermined earlier, more optimistic comments from these officials. Nevertheless, negotiations are expected to continue in the coming days.
The persistent instability in the Middle East led traders to factor in a risk premium for oil, as they anticipated the potential for the Israel-Hamas conflict to destabilize oil production in the crude-rich region.
Read more: Oil prices flat, headed for bleak weekly performance amid demand concerns
Rate cut optimism and a weaker dollar boost oil
Growing optimism over the prospect of lower U.S. interest rates also provided support for oil prices, as traders bet that the world’s largest economy was poised for a soft landing.
The U.S. dollar slid to a 13-month low, further benefiting crude markets. A softer dollar makes oil more affordable for international buyers.
The Federal Reserve is widely expected to implement an interest rate cut in September, although traders are divided on whether it will be a 25 or 50 basis point reduction.
Recent inventory data from the U.S. showed that fuel demand in the country remained strong, further bolstering bets that oil demand will remain robust.
However, persistent concerns over an economic slowdown in China, the world’s top oil importer, limited the overall gains in crude prices.
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