NEW YORK (Reuters) – Oil prices gained roughly 2% on Monday after a weekend attack on a Saudi oil facility by Yemen’s Houthi forces threatened crude supplies and as traders looked for signs that top economies would take measures to counteract a global slowdown.
Brent crude LCOc1, the international benchmark for oil prices, settled at $59.74 a barrel, rising $1.10, or 1.88%.
U.S. West Texas Intermediate (WTI) crude futures CLc1 settled at $56.21 a barrel, up $1.34, or 2.44%.
Signs of a slight softening of the trade war between the United States and China, including Washington extending a reprieve that permits China’s Huawei Technologies HWT.UL to buy components from U.S. companies, also helped oil prices.
A drone attack by the Houthi group on an oilfield in eastern Saudi Arabia on Saturday caused a fire at a gas plant, adding to Middle East tensions, but state-run Saudi Aramco said oil production was not affected.
“The oil market seems to be pricing in again a geopolitical risk premium following the weekend drone attacks on Saudi Arabia, but the premium might not sustain if it does not result in any supply disruptions,” said Giovanni Staunovo, oil analyst for UBS.
Iran-related tensions appeared to ease after Gibraltar released an Iranian tanker it seized in July, with the vessel sailing for Greece, though Tehran warned the United States against any new attempt to seize the tanker in open seas.
A rally in equities from growing expectations that global economies would take actions to counteract slowing growth also helped oil, which often follows stock prices.
“The death of the global economy has been greatly exaggerated and the market is starting to realize that,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
China’s announcement of key interest rate reforms over the weekend has fueled expectations of an imminent reduction in corporate borrowing costs in the struggling economy, boosting share prices on Monday.
Crude pipelines opening up in the United States, easing bottlenecks that weighed on the U.S. benchmark, supported WTI in particular.
In the long run, however, more U.S. crude is likely to suppress prices if the oil heads for storage.
“At some point in time, the fact you have a heavy load of barrels come online that wasn’t there a few weeks ago, that’s going to kill the golden goose,” said Bob Yawger, director of energy at Mizuho in New York.
Prices gains were limited by a downbeat report by the Organization of the Petroleum Exporting Countries (OPEC) that stoked concerns about growth in oil demand.
OPEC cut its forecast for global oil demand growth in 2019 by 40,000 barrels per day (bpd) to 1.10 million bpd and indicated the market would be in slight surplus in 2020.
Additional reporting by Bozorgmehr Sharafedin in London and Jessica Jaganathan in Singapore; Editing by Matthew Lewis and Nick Zieminski