In a recent turn of events, oil prices have rebounded after experiencing a nearly 8% decline last week. Traders are closely monitoring the situation in the Middle East, as tensions could potentially impact oil supplies. Additionally, China has taken steps to stimulate its economy, further influencing the oil market.
Global benchmark Brent surged above $74 per barrel, while West Texas Intermediate crossed the $70 mark. Over the weekend, a Hezbollah drone detonated near Prime Minister Benjamin Netanyahu’s residence, leading to a retaliatory military strike by Israel on the group’s strongholds in Lebanon. Furthermore, Israel has indicated its intention to respond to Iran’s alleged missile attack earlier in October.
On a different front, China, being the world’s largest oil importer, reduced its benchmark lending rates following interest rate cuts by the central bank at the end of September. Saudi Aramco CEO Amin H. Nasser expressed positivity about the nation’s oil consumption during a speech in Singapore.
Despite these developments, the oil market remains unpredictable. Traders are navigating the risks associated with instability in the Middle East alongside indications of subdued demand in China. The International Energy Agency has suggested that increasing global supplies may lead to a surplus in the upcoming year, with OPEC+ planning to gradually restore suspended capacity starting in December.
Fatih Birol, the head of the IEA, emphasized the potential for a decrease in oil prices if the situation in the Middle East does not escalate significantly. Factors contributing to this projection include the rapid rise in output in the Americas.
Despite the aforementioned factors, traders are still cautious. Bullish call options are trading at an elevated price compared to bearish puts, and weekly call option volumes for the global Brent benchmark reached a near record high last week.
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