Sentiment Swings And Oil Gains As Israel Steps Up Counter-Offensive

Meanwhile, bullish sentiment is expressed for ailing China: File Image/Pixabay

Oil prices on Monday recovered to a degree following last week's purge, with Israel defying hopes for a lessening of hostilities in the Middle East and attendant worry that a direct conflict with Iran will lead to supply shortage.

Even though analysts spent most of last week worrying about a glut of global supply due to perceptions of waning demand, sentiment on Monday suddenly reversed course when Israeli forces evacuated people from refugee camps in northern Gaza as a prelude to airstrikes.

As a result, Brent settled up $1.23, or 1.68 percent, at $74.29 per barrel, while West Texas Intermediate settled up $1.34, or 1.94 percent, at $70.56 per barrel.

Dennis Kissler, senior vice president of trading at BOK Financial, said, "Israel is also preparing for more retaliatory attacks likely into Iran," implying that more upward movement for oil could be in the cards for later this week.

Meanwhile, last week's other  source of bearish sentiment, China, was cited in a rare positive light on Monday by Saudi Aramco, whose CEO Amin Nasser told delegates at a Singapore energy conference that he was still "fairly bullish" on the country's oil demand thanks to recently declared fiscal support from government, as well as to rising demand for jet fuel and liquid-to-chemicals.

This was accompanied by banks in China cutting their benchmark lending rates by a more than-expected 25 basis points, as part of a series of measures to revive growth; the one-year loan prime rate (LPR) was lowered to 3.10 percent from 3.35 percent, while the five-year LPR was lowered to 3.60 percent from 3.85 percent.

For his part, Fatih Birol, executive director at the International Energy Agency, told media that "If we don't see a major escalation of the situation in the Middle East, I still expect that oil prices will be further under pressure because we are entering a period, including next year, of more comfortable markets."

But Bloomberg noted that "Bullish call options continue to trade at a premium to bearish puts, while weekly call option volumes on the global Brent benchmark were the second-largest on record last week."