(London) Oil prices were moving in positive territory on Monday, driven by the escalation of tensions in the Middle East and the outlook for more robust Chinese demand, but also by the rise of the euro against the dollar after the first round of legislative in France.
At around 6:15 a.m. ET, the price of a barrel of North Sea Brent crude for delivery in September, which is the first day of use as a benchmark contract, gained 0.28% to $85.24.
Its American equivalent, a barrel of West Texas Intermediate (WTI), for delivery in August, rose 0.25% to $81.74.
Oil is “driven by escalating tensions between Israel and Hezbollah and a strong Chinese manufacturing PMI,” DNB analysts summarized.
Nearly nine months after the start of the war, sparked by an unprecedented Hamas attack on Israel on October 7, Israel struck the southern Gaza Strip on Monday after Palestinian fighters fired 20 rockets against its territory.
This war also raises fears of a conflict between Israel and the Lebanese Hezbollah after an increase in attacks on both sides of the Israeli-Lebanese border.
Manufacturing activity in China, the world’s largest oil importer, saw its strongest growth in three years in June, according to an independent index published on Monday.
“In addition, the hurricane Beryl [catégorie 4]described by forecasters as “extremely dangerous”, is expected to cause enormous damage today” in the Caribbean, and although it should spare oil and gas operations in the Gulf of Mexico, “he reminds that forecasters expect an active hurricane season,” according to DNB.
In addition, “the markets are breathing a little sigh of relief” after the results of the first round of the legislative elections in France, which is boosting the euro and reciprocally weighing on the dollar, a phenomenon likely to fuel oil purchases, indicates John Evans, analyst at PVM Energy.
When the dollar falls, it actually pushes down the cost of oil, which is traded in the US currency, which tends to push up the price of a barrel.
The markets estimate that the results of the first round of legislative elections in France reduce the probability that the National Rally will obtain an absolute majority in the National Assembly, which is seen as the “least worst scenario”, comments John Plassard, specialist for Mirabaud.
The National Rally came out on top with more than 33% of the vote, slightly below the latest polls. The New Popular Front reached nearly 28% and the presidential camp 20%.