Oil prices posted some gains on Monday as supply concerns persisted due to the ongoing geopolitical conflict in the Middle East, but the possibility of a US recession kept crude’s rise in check.
Brent crude oil futures for the October contract added 0.16% to $76.69 per barrel, while US West Texas Intermediate (WTI) crude futures advanced 0.51% to $72.93 per barrel before easing by 0.25% to $72.41 per barrel.
Prices were slightly lifted by the continued war between Israel and the Palestinian military group Hamas, with the latest sign of escalation involving Israeli airstrikes on two more school shelters on Sunday in Gaza, which left 30 casualties and dozens injured.
The incident occurred after ceasefire and hostage truce discussions in Cairo, Egypt, failed to reach a solution on Saturday.
Israel and the US are anticipating severe hostility within the oil-rich Middle East after Iran and its allied militias, Hamas and Lebanon’s Hezbollah, vowed retaliation for the deaths of Hamas’ political leader Ismail Haniyeh and senior Hezbollah commander Fuad Shukr last week.
US Recession Fears Fuel Slow Oil Demand Concerns
While supply disruption risk from tensions in the Middle East supported crude prices, Brent and WTI still declined 3% to eight-month lows on Friday as a series of weak economic readings from the top oil consumer, the US, further reinforced prospects of a recession in the world’s largest economy.
Nonfarm payroll data showed on Friday that the US added 114,000 jobs in July, a significant drop from June’s 179,000 and ended below expectations of 176,000. The unemployment rate climbed to 4.3% last month from 4.1% in June, its highest since October 2021.
The report came after the Institute for Supply Management (ISM) US manufacturing purchasing managers’ index (PMI) fell to its lowest in eight months at 46.8 in July. The reading suggested that the Federal Reserve may have kept high borrowing costs longer than preferred.
A potential recession may weigh on future fuel demand in the US despite recent inventory data showing that consumption stayed high due to travel-heavy conditions in the summer.
China’s lackluster economic cues were also significant to oil markets, as soft data from the no. 1 importer globally increased sluggish demand concerns. Its lower diesel consumption is also dragging oil prices worldwide.
