Oil prices rise on regional tension fears and China demand concerns

Traders reevaluate Middle East supply risks as China's real estate woes deepen
Oil prices rise on regional tension fears and China demand concerns
The possibility of a change in the Fed's hiking bias could impact oil prices positively

Oil prices increased today, Tuesday, driven by escalating geopolitical tensions in the Middle East. Brent crude futures rose by 0.33 percent, reaching $82.67 a barrel. Meanwhile, U.S. West Texas Intermediate crude climbed 0.44 percent, to $77.12 a barrel, by 7:00 AM GMT.

Factors supporting prices

The deepening real estate crisis in China, particularly with the liquidation order for China Evergrande Group, raised concerns about crude demand from the world’s largest oil consumer. Moreover, oil prices trading above $80 per barrel are now reflecting a renewed geopolitical risk premium. Analysts suggest that if the Middle East tensions persist without a strong U.S. reaction, this premium may fade within a week or two. However, potential U.S. interventions could sustain oil prices in the $80-100 per barrel range.

Federal reserve decision

As the Federal Reserve‘s two-day meeting begins, investors are anticipating the interest rate decision. While policymakers are expected to hold interest rates steady, the possibility of a change in the Fed’s hiking bias could impact oil prices positively. Lower interest rates are seen as supportive of oil prices and could contribute to increased demand.

Read: Gold prices rally on Middle East tensions and Fed meeting anticipation

Market sentiment

Market expectations, according to a Reuters poll, suggest a decrease in U.S. crude oil and distillates inventories and an increase in gasoline stocks. The American Petroleum Institute will release U.S. stockpiles data today, followed by the Energy Information Administration’s report on Wednesday. These data releases, coupled with geopolitical developments, continue to shape market sentiment.

In a landscape marked by uncertainties ranging from China’s economic challenges to Middle East tensions and Fed decisions, the global oil market remains dynamic and responsive to a multitude of factors.

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