Oil Steady As China Holds Rate Cuts And Amid Unprecedented Middle East Escalation

9/20/2024 3:16:20 PM

(MENAFN- Investor Ideas) crude oil is holding steady today with a slight downside bias across both major benchmarks after gaining more than 2% yesterday.

Crude prices are under pressure as the People's bank of China has not cut interest rates, especially given the lackluster performance of the Economy and the Fed's aggressive cut. This negative factor mixes with the unprecedentedly heightened geopolitical tensions in the Middle East and growing warnings of a wider regional war.

While keeping one- and five-year loan prime rates unchanged was not unexpected, it was necessary to support sluggish economic growth. This appears to have put downward pressure on oil prices as concerns remain over the future of demand for crude from the world's largest importer.

In contrast, along with optimism about further interest rate cuts by the Federal Reserve this year, geopolitical factors from the Middle East are providing support for oil prices and may help stop the repeated downward correction.

There are increasing signs of the inevitability of a multi-front regional war in the Middle East, the boundaries of which we will not know, and, in my opinion, it is not unlikely that if it gets out of control it will disrupt crude supplies from the region - although this is unlikely according to many analysts and the markets.

A large-scale war between Hezbollah and Israel seems inevitable, according to The Washington Post. The Wall Street Journal also reported warnings from the US Secretary of Defense and other officials about the approach of an Israeli ground attack. The Secretary of Defense also postponed a trip scheduled for next week to Israel in light of the escalation, according to Axios.

All this comes with the impossibility of reaching a ceasefire in Gaza that would ward off the specter of a large-scale regional war. US administration officials told The Journal that they do not expect an agreement to be reached during the remainder of Joe Biden's presidency, and said that no agreement is inevitable - contrary to the statements made by Biden and his Secretary of State during previous rounds of negotiations. An Arab official also told The Journal that there is no chance of reaching an agreement.

MENAFN20092024000142011025ID1108697751

Legal Disclaimer:
MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.