Brent crude prices rise amid Israeli air strikes in Lebanon and expected China growth

Luis Salazar

2 months ago

Brent crude prices rise amid Israeli air strikes in Lebanon and expected China growth

The price of oil has risen sharply on the back of a massive economic stimulus programme in China as worries about a broader Middle East conflict increase.

The benchmark price of oil rose by about a dollar as news of the latest bout of Israeli bombing in Lebanon broke.

A barrel of Brent crude now costs $75.12, close to the highest point since the start of the month.

Money blog: Millions can get £150 off energy bills

Economic growth expectations, as always, have been impacting prices too.

Top oil importer China announced overnight a new stimulus programme to grow its struggling economy.

Concerns over the slowdown in the world’s second-largest economy, were part of the reason a barrel of Brent crude had hit a near three-year low earlier this month.

CHINA ROLLS OUT STIMULUS TO BOOST FORTUNES

Nicole Johnston

Asia correspondent

@nicole_reporter

China’s central bank has revealed its biggest stimulus package since the pandemic in a bid to revive the country’s flagging economy.

It includes interest rate cuts on new and existing mortgages.

The world’s second-largest economy has been in the doldrums – underpinned by rapid real estate expansion.

For two decades China has been building homes, neighbourhoods and whole cities at an unprecedented pace. But that has come unstuck.

It built too much too fast. Housing became a speculative investment.

Many of these houses and apartments are now empty or unfinished, millions of Chinese have lost their life savings and some of the country’s largest real estate companies have either gone bust or are close to it.

Chinese president Xi Jinping is framing so-called “new productive forces” as one way to drive growth. He is promoting investment in green energy, electric vehicles, solar panels, lithium batteries and advanced technology like artificial intelligence and semiconductors.

China has doubled down on its investment in electric vehicles, putting it on a collision course with the West. Europe and the US have accused China of over-production, manufacturing more cars than the world can absorb and selling them for cut-throat prices.

China has railed against this, blaming the West for anti-competitive protectionist policies. A further trade war is brewing as the EU and US impose tariffs.

This year China has introduced a range of measures to help its economy, from allowing local governments to buy distressed real estate to reducing housing deposits. So far they have been incremental steps, not enough to turn the ship around.

However, this new announcement is a significant salvo to boost the economy. The people of China and the rest of the world are waiting to see if it will be enough.

But China implemented a range of interventions to kickstart growth. The Chinese central bank reduced the amount of money banks are required to reserve and slashed interest rates on loans to commercial banks.

It’s intended to address the property market slump and boost weakened consumer demand. Not since the pandemic has such an intervention taken place.

Another reason prices had been suppressed was the prospect of increased supplies from the OPEC+ group of major oil-producing nations.

While the price has moved above the $70 low of two weeks ago, it is still comparatively low. For most of the last year, a barrel has cost over $80.

Because of the recent lows and the strength of the pound against the US dollar, automotive services firm RAC said prices at the pumps are now falling more quickly than at any other time this year and could drop further in the coming weeks.

The average price of petrol and diesel across UK forecourts is nearly 7p per litre cheaper than a month ago, and is the lowest motorists have seen in almost three years.

Currently, the cost of filling a 55-litre family car is almost £4 cheaper than a month ago.

It can take roughly ten days for crude oil prices to filter through to petrol and diesel prices.

Israel has been bombing Hezbollah terrorist targets in Lebanon as the group fired rockets into Israeli territory. Monday was the deadliest day of attacks in more than a decade.

Lebanon said 492 people were killed in Israeli strikes, the biggest single-day death toll in the country for more than a decade.

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