The price of oil rose by another 0,8% after yesterday's rally (WTI crude rose by 4.26% and Brent crude by 2.81%), caused by increased concerns about the broader conflict in the Middle East.
Yesterday, the media reported that Hamas leader Ismail Haniyeh was killed in the Iranian capital Tehran. His death came less than 24 hours after the most senior military commander of Hezbollah was killed in an Israeli strike in Beirut. These events have raised concerns that the war in Gaza between Israel and Hamas is escalating into a larger war in the Middle East, which could lead to disruptions in oil supplies from the region. Meanwhile, experts warned that markets will be worried about Iran's ability to escalate tension through its control of the Strait of Hormuz. The blockade of this key waterway could jeopardize the transportation of 15-20% of the world's oil supplies.
Oil is also supported by yesterday's data on oil reserves in the United States (the world's largest consumer of oil). The U.S. Energy Information Administration (EIA) reported that crude inventories fell by 3.436 million barrels in the week ended July 26, following a decline of 3.741 million barrels in the previous week. Overall, this was the fifth straight weekly decrease in the U.S. crude inventories. Economists had anticipated a draw of 1.600 million barrels. At the same time, gasoline stocks dropped by 3.665 million barrels. Analysts had expected a decrease of 1.300 million barrels. The previous week witnessed a plunge of 5.572 million barrels.
However, further growth in oil prices was limited by the positive dynamics of the US currency and Chinese data. The US Dollar Currency Index (DXY), which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona) rose by 0.27% to 104.38.
Meanwhile, data released by Caixin/S&P Global showed that business activity in China's manufacturing sector unexpectedly contracted in July (for the first time since October 2023), which was caused by a drop in new orders and weak production growth. According to the report, the manufacturing PMI fell to 49.8 points from 51.8 points in June. Economists had expected the index to decline to 51.5 points. An index reading below 50 points indicates a contraction in activity in the sector. Thus, data from Caixin/S&P Global confirmed yesterday's official estimates, which showed that the manufacturing PMI fell to 49.4 points from 49.5 points in June.