Global interest rate cuts combined with escalating geopolitical conflicts have led to a rebound in oil prices from a three-year low

Due to the continued escalation of tensions in the Middle East, crude oil prices opened higher this week, but the bearish sentiment in the oil market is far from extinguished, with prices slightly falling after the rise.

Furthermore, major global economies have entered a period of easing, which has also had a positive impact on oil prices. However, the market remains cautious about the long-term effects of these policies.

As of the time of writing, Brent crude oil futures rose by 2.32% to $74.9 per barrel. Brent crude had previously fallen to a three-year low earlier this month.

U.S. WTI crude oil rose by 2.4% last week to $72.1.

However, some analysts believe that as the impact of rate cuts fades, the oil market may refocus on the issue of weak demand, leading to renewed downward pressure on oil prices.

Escalation of Geopolitical Conflicts, Global Rate Cuts Support Oil Price Increase

According to CCTV International News, Israeli media reported that an Israeli military Arabic-speaking spokesperson once again warned Lebanese citizens in Arabic on their social media accounts today, saying, "If you are near or in buildings belonging to Hezbollah or buildings used to store weapons and equipment, you should immediately leave at least one kilometer away, or leave the area." Israeli media reports indicate that this means the Israeli military is planning a new round of large-scale airstrikes on targets inside Lebanon.

Analysts believe that these strikes could bring the conflict between OPEC oil-producing country Iran, which supports Hezbollah, and Israel closer, potentially triggering a broader war in the region.

IG analyst Yeap Jun Rong told Reuters, "The escalating geopolitical tensions in the Middle East between Israel and Hezbollah could provide good support for oil prices under the broader regional conflict risks."

JPMorgan Chase CEO Jamie Dimon also told CNBC in an interview that the geopolitical crisis has worsened, global stability has deteriorated, and it is a major risk factor for global energy issues.

"Geopolitics is getting worse, not better. Energy supply could have accidents. There are a lot of wars going on right now."

Dimon had previously stated that the Russia-Ukraine conflict is the biggest risk he sees the world facing, larger than high inflation or a U.S. economic downturn.

Furthermore, major global economies have successively entered a period of rate cuts, to some extent eliminating the downside risks for oil prices.

Last week, the Federal Reserve aggressively cut rates by 50 basis points, while the European Central Bank had previously lowered its key deposit rate by 25 basis points Today, the People's Bank of China announced that it will soon cut the reserve requirement ratio by 0.5 percentage points, providing the financial market with approximately 1 trillion yuan in long-term liquidity. It may also choose to further reduce the reserve requirement ratio by 0.25-0.5 percentage points before the end of the year.

What is the trend of oil prices? Demand remains a key issue after the impact of rate cuts fades

Vandana Hari from Vanda Insights told Bloomberg, "Crude oil prices may temporarily enter a consolidation phase, consolidating last week's gains."

However, as the impact of rate cuts fades and is largely digested, traders will soon shift their focus back to the demand side. Vandana Hari stated:

"The market excitement brought by the significant rate cuts by the Federal Reserve has boosted market sentiment. However, at some point, as the spotlight on the Federal Reserve dims, attention in the oil market will return to the deteriorating demand situation, and we may see oil prices facing downward pressure again."

Analysts at ING Commodities wrote in a report last week, "European refiners have reduced their operating rates due to poor margins."

Meanwhile, U.S. oil producers are evacuating workers from oil production platforms in the Gulf of Mexico, with expectations of a second hurricane sweeping through offshore oil fields within two weeks. Several oil companies have suspended some production