WTI bounces back to near $77 on upside risks to widening Middle East woes

• The Oil price recovers to near $77 on fresh supply concerns after Iran-backed Hezbollah’s rocket strike on Golan Heights.
• Caixin Manufacturing PMI for July and the Fed’s policy meeting will guide the next move in the Oil price.
• The Fed is expected to deliver dovish guidance on interest rates.

West Texas Intermediate (WTI), futures on NYMEX, rebound to near $77.00 in Monday’s European session after plunging to near $76.00 on Friday. The Oil price rebounds as an air strike in the Israeli-occupied Golan Heights has prompted fears of widening Middle East tensions.

The Israeli and the United States (US) governments have held Iran-backed Hezbollah responsible for the rocket strike on Golan Heights that killed 12 people. In response to that, Israel has vowed to retaliate, which has resulted in upside risks to the Oil supply concerns.

While the Oil recovery move is still uncertain due to uncertainty over its global demand amid economic vulnerability in China, which is its largest importer in the world. Oil imports volume by China has fallen significantly as the scale of spending and investment has declined due to weak demand from domestic and the overseas market.

This week, the Caixin Manufacturing PMI for July and the Federal Reserve’s (Fed) monetary policy meeting will be the key triggers for the Oil price. Activities in the Chinese manufacturing sector are estimated to have expanded at a slower pace to 51.6 from the former release of 51.8.

Meanwhile, the Fed is expected to leave interest rates unchanged in the range of 5.25%-5.50% for the eighth time in a row but turn dovish for the remaining year. Investors expect that the Fed will admit to decent progress in disinflation and potential risks to the labor market. The Fed could openly endorse rate cuts in September but will refrain from committing to a specific rate-cut path.