Oil rises on Middle East escalation fears, US interest rate cut expectations By Reuters

By Florence Tan

SINGAPORE (Reuters) – Oil prices extended gains on Monday on fears that a major escalation in the Middle East conflict in Gaza could disrupt regional oil supplies, while looming U.S. interest rate cuts lifted the global economic outlook and fuel demand.

Futures were up 37 cents, or 0.5 percent, at $79.39 a barrel by 2300 GMT, while U.S. futures were at $75.19 a barrel, up 36 cents, or 0.5%.

In one of the biggest clashes in more than 10 months of war on the border, Hezbollah fired hundreds of rockets and drones into Israel on Sunday, while the Israeli military said it struck Lebanon with about 100 planes to counter a bigger attack.

The clash is raising fears that the conflict in Gaza risks turning into a regional conflagration that draws in Iran, Hezbollah’s backer, and Israel’s main ally, the United States.

“Israel’s pre-emptive strike on Lebanon over the weekend to prevent an imminent attack by Hezbollah should ensure a stronger open this morning as crude oil (WTI) looks to extend its early rally to $77.50 ahead of $80.00,” said IG analyst Tony Sycamore. note.

Both oil benchmarks gained more than 2 percent on Friday after US Federal Reserve Chairman Jerome Powell hinted at an imminent start to interest rate cuts.

“The prospect of monetary policy easing boosted sentiment in the commodity complex,” ANZ analysts said in a note, adding that they expected the Fed to implement a gradual series of interest rate cuts.

However, oil prices fell last week as a weak outlook for major economies weighed on demand for the fuel, the bank added.

The US Department of Energy said on Friday it had bought nearly 2.5 million barrels of oil to help replenish the Strategic Petroleum Reserve.

The U.S. oil rig count was unchanged at 483 last week, Baker Hughes said in its weekly report. (RIG/U)