Pedro Goncalves writes:
Oil prices climbed on Tuesday after China unveiled a series of policy measures to support its economy and a major Israeli strike on Hezbollah targets in Lebanon heightened geopolitical tensions in the Middle East.
Brent crude rose above $74 a barrel, recovering from a 0.8% decline on Monday, while West Texas Intermediate (CL=F) hovered near $71. The rally was fuelled by the People’s Bank of China (PBoC), whose governor, Pan Gongsheng, announced a broad set of stimulus initiatives at a briefing in Beijing. The measures are aimed at achieving China’s annual growth target of around 5%, following concerns about the country’s faltering economy.
The stimulus package includes boosting bank lending to consumers and businesses, alongside a cut to the PBoC’s key short-term interest rate, in a bid to stimulate growth and drive energy demand in the world’s largest oil importer.
“At the margin, this would be positive for China demand,” said Han Zhong Liang, an investment strategist at Standard Chartered in Singapore. “The feed-through from lower rates to the real economy will be key from here,” he added, Bloomberg reported.
Oil prices had been under pressure this quarter, with Brent and WTI both down around 14%, amid worries over the Chinese economy and expectations of increased output from OPEC+. The latest moves by Chinese authorities offer hope that demand from the key market could pick up, providing some relief for prices.
Meanwhile, the FTSE 100 (^FTSE) opened in the green, up 27 points or 0.33%. For more details check our live coverage here.