Oil Prices Experience Modest Rise Amidst Geopolitical Tensions and Economic Stimulus

Oil prices rose slightly due to Middle East instability and China’s stimulus plans, despite global growth concerns, U.S. tariffs, and Russia-Ukraine ceasefire talks limiting gains. Analysts indicate that economic factors, including U.S. military actions in Yemen and the Israel-Palestinian conflict, also influenced market dynamics.

Oil prices experienced a slight increase on Tuesday, influenced by Middle Eastern instability, a stimulus plan and economic data from China. Despite this, concerns regarding global growth, U.S. tariffs, and ongoing ceasefire negotiations between Russia and Ukraine limited these gains.

Brent crude futures rose by 17 cents, equating to 0.2%, reaching $71.24 per barrel. Similarly, U.S. West Texas Intermediate crude increased by 14 cents or 0.2%, settling at $67.72 per barrel. Analysts from ING noted, “Along with U.S. strikes on the Houthis in Yemen, several factors provided support to the market.”

China’s announcement of a plan to revitalize domestic consumption, along with stronger-than-anticipated retail sales and fixed asset investment growth, contributed to market confidence. The state council introduced measures such as income boosts and childcare subsidies.

Optimism was further bolstered by data from China indicating a rise in retail sales growth for January-February, despite declines in factory output and an increase in the urban unemployment rate. Notably, crude oil throughput in China, the largest crude importer globally, increased by 2.1% in the same period, aided by new refinery activity and holiday travel.

Support for oil prices was also driven by President Donald Trump’s commitment to continue U.S. military actions against Yemen’s Houthis, demanding an end to their attacks on Red Sea vessels. In parallel, escalating violence in the Israel-Palestinian conflict, with Israeli aerial operations in Gaza resulting in significant casualties, raised concerns.

Acknowledging ongoing demand worries, the OECD reported that Trump’s tariffs may hinder economic growth in the U.S., Canada, and Mexico, negatively impacting global energy consumption. Robert Rennie from Westpac commented, “With global supply surging and tariffs and trade wars set to hit global demand, we remain of the view that prices will head lower and eventually reach the mid $60s.”

Additionally, Venezuela’s PDVSA is orchestrating operational strategies to maintain oil production and exports through its venture with Chevron following the expiration of the U.S. company’s license next month. Negotiations between Trump and Russian President Vladimir Putin regarding the Ukraine conflict are also being closely monitored, with potential sanctions relief weighed against global supply considerations.

In summary, oil prices have risen slightly, buoyed by geopolitical instability in the Middle East and positive economic signals from China. However, persistent global growth concerns, coupled with U.S. tariffs and increasing production, suggest that the upward trend may not be sustainable. Analysts emphasize the potential for future price declines, indicating that the mid-$60 range could be a likely target amidst these challenges.

Original Source: ina.iq