Oil prices rise slightly after posting weekly gains following the Fed’s rate cut.

Oil prices found support at the start of the week due to “Fed optimism, Middle East tensions, and potentially a boost from the People’s Bank of China’s decision to cut its 14-day reverse repo rate by 10 basis points, injecting liquidity into the financial system,” noted Ipek Ozkardeskaya, senior analyst at Swissquote Bank.

Economists indicated that this rate cut is not indicative of further easing but rather a catch-up to the July reduction in the 7-day reverse repo rate. China’s financial regulators, including its top central banker, are set to hold a news briefing on Tuesday, raising expectations for significant stimulus measures to support its struggling economy.

WTI and Brent both recorded substantial weekly gains last week after the Federal Reserve decided on Wednesday to cut its key interest rate by 50 basis points. Crude prices surged on Thursday alongside global equities, alleviating fears of an economic downturn. Additionally, concerns about a broader Middle East conflict threatening oil supplies contributed to the rise.

Over the weekend, Hezbollah launched rocket attacks from Lebanon into northern Israel, responding to Israeli strikes that killed a senior commander and targeted Hezbollah’s communications. Deputy leader Naim Kassem stated that this was just the beginning of an “open-ended battle” with Israel.

Despite the geopolitical risks bolstering oil prices, the market remains cautious, as the Middle East conflict has yet to significantly impact supply, according to Mazen Salhab, chief market analyst for the Middle East and North Africa at BDSwiss.

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