Oil prices rose by more than 2% on Friday, significantly limiting the previous weekly losses, Commerzbank’s commodity strategist Carsten Fritsch notes.

OPEC+ production increase from October still on the table

“The rally was linked to comments from Fed Chairman Jerome Powell, who opened the door to interest rate cuts by the Fed from September in his speech at Jackson Hole. This boosted sentiment in the financial markets, which also impacted the oil market. Oil prices rose at the start of the new trading week as Israel and the Hezbollah militia exchanged fire over the weekend. This increases the risk that the conflict could escalate and affect oil supplies.”

“However, the situation seems to have calmed down, which is why gains were initially limited. This only changed with the news that there is a risk of production losses in Libya. Brent then climbed back above the $80 per barrel mark. An escalation in the Middle East is also possible at any time. Iran, for example, has reiterated its intention to retaliate against Israel.”

“On the other hand, demand concerns have not suddenly disappeared and a possible increase in OPEC+ production from October is still on the table. As a result, further upside potential for oil prices is likely to be limited.”