U.S. crude oil rose more than 1% on Thursday, a day after the Federal Reserve cut interest rates for the first time in more than four years and as tensions in the Middle East continue to escalate.
The Fed surprised markets on Wednesday by announcing a larger-than-expected rate cut of half a percentage point. Oil prices closed slightly lower, however, with the rate cut already largely priced in.
The U.S. benchmark index has now recovered its losses this year, although it is still down more than 11% in the third quarter.
Phil Flynn, senior market analyst at Price Futures Group, said the Fed’s rate cut appears to be “getting some short hedge funds out of their bearish obsession with oil.”
Here are energy prices as of Thursday’s close:
- West Texas Intermediate October contract: $71.95 per barrel, up $1.04, or 1.47%. Year-to-date, U.S. crude is up less than 1%.
- Brent November contract: $74.88 a barrel, up $1.23, or 1.67%. Year-to-date, the global benchmark is down nearly 3%.
- RBOB Essence October contract: $2.06 per gallon, up 2.45%. Year-to-date, gasoline is down about 2%.
- Natural gas October contract: $2.348 per thousand cubic feet, up 2.8%. Year-to-date, gas is down more than 6%.
Crude futures are rising again as tensions rise between Israel and the Iran-backed Hezbollah terror group in Lebanon. Prices are also being supported by a 1.6 million barrel drop in U.S. oil inventories last week.
Israeli warplanes and artillery led strikes Strikes targeted Hezbollah in southern Lebanon on Thursday. The strikes came after pagers and walkie-talkies used by the militia exploded this week, killing dozens and wounding thousands across Lebanon. U.S. officials told NBC News that Israel was behind the pager attack. Israel has not claimed responsibility for the attacks.
Israeli Defense Minister Yoav Gallant said Wednesday that his country’s focus was shifting from Gaza to the northern border with Lebanon, where there are conflict zones. 60,000 Israelis were evacuatedas a “new phase” of the war begins.
Oil market analysts have been warning for months that an all-out war between Israel and Hezbollah, which have so far exchanged rocket fire, could force OPEC member Iran to intervene directly, increasing the risk of disruptions to Middle Eastern crude supplies.
“We continue to emphasize that Lebanon is the primary pathway to oil disruption through Iran’s direct involvement in a broader regional war,” Helima Croft, head of global commodities strategy at RBC Capital Markets, told clients in a note Thursday.
