Crude oil prices started to trade this week with a gain as a rocket strike on the Golan Heights rekindled fears of a conflict escalation in the Middle East.
Prices remain near a six-week low, per Bloomberg, but the trend is positive, with Chinese economic data alleviating concerns about demand in the world’s largest oil importer. The latest data was about industrial profits for June, which showed a monthly acceleration.
“Concerns around China’s economy have broadly weighed on energy commodity prices,” Vivek Dhar, an analyst at Commonwealth Bank of Australia, told Bloomberg. “Demand concerns, though, will likely give way to rising geopolitical risks in the Middle East early this week.”
On Saturday, a rocket strike on the Israel-annexed Golan Heights killed more than a dozen people. Hezbollah denied responsibility for the attack but the Israeli government has threatened retaliation against the Lebanon-based group, sparking the latest round of escalation fears.
Last week, oil prices logged their third weekly loss in a row, mostly on demand concern about China as refinery run data pointed towards weakening demand for oil in the country as did figures showing an annual decline in imports of the commodity.
Fuel imports into China also fell, by 11%, over the first half of the year, reinforcing the perception of weakening overall demand.
Still, it looks like geopolitics will be the leading factor for oil prices this week.
“Worries over escalating tensions in the Middle East prompted fresh buying, but gains were limited by lingering concerns of weakening demand in China,” Fujitomi Securities analyst Toshitaka Tazawa told Reuters earlier today.
Besides the latest flare-up in violence in the Middle East, Israel appears to have reconsidered its stance on a prospective ceasefire with Hamas and now wants changes to be made to the ceasefire plan. This has created complications in the ceasefire talks, according to a Reuters report that cited an unnamed Western official and two unnamed Egyptian sources.
By Irina Slav for Oilprice.com
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