Investing.com– Oil prices settled higher Tuesday, underpinned by ongoing tensions in the Middle East as well as slowing demand in major oil consumer China.
At 2:30 p.m. ET (1830 GMT), rose 2.4% to $76.04 a barrel, while gained 2.2% to $72.09 a barrel.
Middle East tensions provide support
Concerns over a bigger Middle East conflict continue to grow amid a report from Israel’s Channel 12 saying that Israel is eyeing an attack on Iran within days.
U.S. Secretary of State Antony Blinken is in Israel to meet with Israeli leaders and attempt to secure a ceasefire.
Reports last week said Israel will not target the country’s oil and nuclear infrastructure.
“Tensions in the Middle East continue to be reflected in the options market,” said analysts at ING, in a note. “The volatility skew shows that calls are becoming increasingly more expensive than puts as participants buy protection in the event of a price spike, given the uncertain geopolitical environment. This also ties in with the larger traded volumes we have seen in call options recently.”
China rate cut continue to offer support
The oil markets have taken positive cues from Monday’s interest rate cut by the Chinese central bank.
However, gains have been limited as this move comes as part of a swathe of recent stimulus efforts from the country which have been greeted with limited optimism, as Beijing failed to provide details on the timing and scale of the planned measures.
IEA warns China will continue to weigh on oil demand
That said, the crude market still dropped around 7% last week after Chinese growth data disappointed.
International Energy Agency head Fatih Birol warned on Monday that weakness in top importer China will continue to weigh on global oil demand in the coming years.
Birol’s comments, made in an interview with Bloomberg, came after both the International Energy Agency and the Organization of Petroleum Exporting Countries recently cut its demand growth forecast on concerns over China.
China is the world’s biggest oil importer, and has been grappling with a prolonged downturn in economic growth, which is expected to quash the country’s appetite for crude.
Increased electric vehicle adoption in the country is also expected to dampen fuel demand.
(Peter Nurse, Ambar Warrick contributed to this artcile.)