U.S. crude oil rose more than 1% on Thursday, one day after the Federal Reserve slashed interest rates for the first time in more than four years and as tensions in the Middle East continued to escalate.

The Fed surprised the market on Wednesday with a bigger-than-expected cut of a half percentage point. Oil prices, however, closed slightly lower as rate reductions had largely already been priced in.

The U.S. benchmark has now clawed back its losses this year, though it is still down more than 11% in the third quarter.

Phil Flynn, senior market analyst at the Price Futures Group, said the Fed cut appears to be “shaking out some hedge fund shorts from their bearish oil obsession.”

Here are Thursday’s closing energy prices:

• West Texas Intermediate October contract: $71.95 per barrel, up $1.04, or 1.47%. Year to date, U.S. crude oil is up less than 1%.
• Brent November contract: $74.88 per barrel, up $1.23, or 1.67%. Year to date, the global benchmark is down nearly 3%.
• RBOB Gasoline October contract: $2.06 per gallon, up 2.45%. Year to date, gasoline is down roughly 2%.
• Natural Gas October contract: $2.348 per thousand cubic feet, up 2.8%. Year to date, gas is down more than 6%.

Crude futures are on the rebound again as tensions soar between Israel and the Iranian-backed militia group Hezbollah in Lebanon. Prices are also finding support after U.S. oil stockpiles fell by 1.6 million barrels last week.

Israeli warplanes and artillery carried out strikes targeting Hezbollah in southern Lebanon on Thursday. The strikes come after pagers and walkie-talkies used by the militia exploded this week, killing dozens and wounding thousands across Lebanon. U.S. officials told NBC News that Israel was behind the pager attack. Israel has not taken responsibility for the attacks.

Israeli Defense Minister Yoav Gallant said Wednesday that his country’s focus is shifting from Gaza to the northern border with Lebanon, where some 60,000 Israelis have been evacuated, as a “new phase” of the war begins.

Oil market analysts have warned for months that an all-out war between Israel and Hezbollah, which until now have traded rocket fire, could force OPEC member Iran to directly intervene, raising the risk of disruptions to Middle East crude oil supplies.

“We continue to highlight Lebanon as the main pathway to oil disruption through direct Iranian involvement in a wider regional war,” Helima Croft, head of global commodity strategy at RBC Capital Markets, told clients in a Thursday note.

U.S. crude oil edged lower Wednesday with the Federal Reserve’s pivotal decision on interest rates later this afternoon unlikely to provide much in the way of support.

“In theory a rate cut is supportive for oil prices but we’ve seen prices rallying in recent days, likely pricing this in already, hence the response may be muted,” said Matt Smith, lead oil analyst for the Americas at Kpler.

The oil market has been rattled this month by worries about a growing imbalance between supply and demand. The U.S. benchmark is down about 13% in the third quarter, while global benchmark Brent has fallen about 15%.

Here are Wednesday’s energy prices:

• West Texas Intermediate October contract: $71.07 per barrel, down 12 cents, or 0.17%. Year to date, U.S. crude oil is down about 1%.
• Brent November contract: $73.45 per barrel, down 25 cents, or 0.34%. Year to date, the global benchmark has fallen more than 4%.
• RBOB Gasoline October contract: $1.9972 per gallon, down 0.23%. Year to date, gasoline has dropped about 5%.
• Natural Gas October contract: $2.297 per thousand cubic feet, down 1.16%. Year to date, gas has pulled back more than 8%.

Consumption in China is slowing as electric vehicle sales surge in the world’s largest crude importer. At the same time, OPEC+ is expected to increase production in December as output in the U.S., Canada, Brazil and Guyana remains strong.

“We are not expecting fireworks in the sky following Fed rate cuts,” said Manish Raj, managing director of Velandera Energy Partners. 

“The Fed action is unlikely to suddenly spur demand, which has otherwise been soft,” Raj said. “Nobody is hitting the gas stations just because the Fed decides to cut the rates today.”

Andy Lipow, president of Lipow Oil Associates, said a quarter-point cut is probably already priced into the oil market. “A 50 basis point cut is slightly supportive of the oil market since it translates into a weaker dollar and stronger prices for dollar denominated commodities,” Lipow said.

U.S. commercial crude stockpiles fell by 1.6 million barrels for the week ended Sept. 13, according to the Energy Information Administration. Meanwhile, gasoline inventories rose by 100,000 barrels, according to the data.

Geopolitical tensions are also escalating in the Middle East again as fears grow that a major conflict between Israel and the Iran-backed militia Hezbollah is on the horizon. Hundreds of pagers exploded in Lebanon Tuesday in an attack targeting Hezbollah militia members.

SINGAPORE — As the world’s oil traders and analysts gathered at the annual Asia Pacific Petroleum Conference in Singapore last week, the slump in oil and where it was headed was foremost in everybody’s mind.

China, the main engine driving the world’s oil demand, has been sputtering. In the International Energy Agency’s most recent September report, year-on-year global oil demand grew 800,000 barrels per day in the first half of 2024, decelerating to its slowest growth since 2020 .

The main reason for the downturn is a “rapidly slowing China,” where consumption contracted for the fourth consecutive month in July, year on year. China is the world’s largest importer of oil as well as the second-largest consumer, making up 15% of global oil consumption. 

This tepid demand, coupled with oversupply, drove U.S. crude prices to their lowest in over a year earlier this month. Iraq and Kazakhstan, key OPEC+ members, have produced above their monthly quotas under the oil group’s agreement.

Members of the alliance recently postponed plans to hike a planned output increase of 180,000 barrels per day in October, as part of a program to return a broader 2.2 million barrels per day to the market over the following months.

Given the situation, lower oil prices were the dominant theme in Asia’s largest oil conference. The question was not whether oil will go lower, but mostly by how much will it decline in the coming years.

Goldman Sachs’ Co-Head of Global Commodities Research Daan Struyven estimated that crude prices could fall to the low $60s per barrel level by within the next two years, if China demand remained tepid. He did not rule out an even steeper decline.

“We estimate that Brent could fall to roughly $50 per barrel in a moderate [U.S.] recession … We have a fairly benign view on the global economy,” Struyven said during the conference.

The U.S. economy has remained resilient even as high interest rates aimed at curbing sticky inflation have slowed growth and raised recessionary concerns. That said, Americans believe that the U.S. is already in a recession, according to a survey.

“Things are slowing down. Doesn’t mean a bust, I don’t think so. Stagnant? Perhaps, and that’s bad enough for oil,” said Torbjörn Törnqvist, CEO of commodities trading house Gunvor.

Trading Giant Trafigura raised concerns about China’s weak demand, and the global oil consumption tied to it.

“It’s hard to look beyond China when thinking about the supply and demand balance for next year,” Ben Luckock, Trafigura’s global head of oil, told CNBC on the sidelines of the conference.

“I suspect we’re probably going to go into the 60s sometime relatively soon,” he said. Global benchmark Brent is currently trading at $73.09 per barrel, while U.S. West Texas Intermediate is at $70.57 per barrel.

Oil prices have fallen in spite of ongoing tensions in the Middle East, as well as the Russia-Ukraine conflict.

Luckock, however, warned about becoming too bearish.  “It’s dangerous because there’s so many events out there that can ruin your day.”

“I wouldn’t put all your chips on the table being short,” he added.

China’s slowdown has spurred some to scour for alternative oil demand drivers, with a few eyeing India as a potential candidate. India is the third largest consumer of oil at around 5 million barrels of oil per day, 5% of the world’s oil consumption. 

According to IEA’s projections, India is poised to lead oil demand growth in 2024, surpassing China for the first time with an estimated increase of 200,000 barrels per day.

India is the world’s fastest growing large economy, and is targeting to overtake both Japan and Germany to become the world’s third-largest economy in as soon as 2027.

Hong-Bing Chen, general manager at Chinese refiner Rongsheng Petrochemical said that he sees further growth in India, as well as more consumption of gasoline and gas oil from the the South Asian nation.

Others experts were more circumspect.

“Keep in mind that Indian demand is one-third of Chinese demand,” said Vandana Hari, founder and CEO of Vanda Insights. “So is there going to be another China in terms of global oil demand growth in our lifetime or potentially thereafter? I don’t think so,” she said.

India’s growth rate will be consistent and over the long term, well into the mid 2040s, but it’s not going to be the same size and magnitude as that of China’s, said Fereidun Fesharaki, chairman of energy consultancy Facts Global Energy.

U.S. crude oil traded above $71 per barrel on Tuesday, as optimism grows that the Federal Reserve will cut interest rates this week and production is still disrupted in the Gulf of Mexico.

“Supply disruptions are making their mark, including Hurricane Francine’s impact on US Gulf of Mexico infrastructure,” said Svetlana Tretyakova, senior analyst at Rystad Energy.

“Expectations of a US Federal Reserve rate cut are gaining momentum, which could be good news for demand,” Tretyakova said.

Here are Tuesday’s energy prices:

• West Texas Intermediate October contract: $71.20 per barrel, up $1.11, or 1.58%. Year to date, U.S. crude oil is down about 1%.
• Brent November contract: $73.61 per barrel, up 86 cents, or about 1.18%. Year to date, the global benchmark has fallen nearly 5%.
• RBOB Gasoline October contract: $1.9929 per gallon, up 1.25%. Year to date, gasoline has declined more than 5%.
• Natural Gas October contract: $2.419 per thousand cubic feet, up 1.94%. Year to date, gas has pulled back nearly 5%.

More than 200,000 barrels per day remained offline in the Gulf as of Monday due to Hurricane Francine, according to the Bureau of Safety and Environmental Enforcement. Production from undamaged facilities will be brought back online immediately after checks have been completed, according to the agency.

The oil market is also bracing for the Fed’s decision Wednesday on interest rates. The central bank is widely expected to lower rates, though Wall Street is divided on the magnitude of the cut.

U.S. crude oil is down about 13% this quarter while Brent has fallen around 15% as demand slows in China, the world’s largest crude importer, and OPEC+ plans to increase production in December.

“Supply has been pretty strong,” Chevron CEO Mike Wirth told CNBC’s “Squawk on the Street” Tuesday.

“We’ve seen growth in supply primarily in the Americas,” Wirth said. “We’ve got OPEC with some capacity offline and demand has been a little less than most people expected as we see a slowing economy here, we’ve seen slower growth in China than I think most people expected.”

The NYMEX oil chart has three technical features. They signal a continuation of the uptrend with a target near $87. However, movement toward this target is hindered by several resistance features which tend to slow the trend momentum.

The first technical observation is the behavior of the Guppy Multiple Moving Average indicator. The long-term group of averages is consistently well separated, indicating strong investor support for the uptrend. When price drops, investors come into the market as buyers, supporting the trend.

There is no current evidence of compression in the long-term GMMA. Compression shows that some investors are joining in the selling activity and signals the development of a bearish outlook. Price consistently rebounds from the upper edge of the long-term GMMA and this shows continued support for the uptrend.

The second technical observation is the role of the uptrend line. From June 2017 until August 2018, the uptrend line acted as a support level. This confirmed trend strength. But in August 2018, the price fell below the trend line and this is indicative of some trend weakness.

Now the uptrend line acts as a resistance feature. Price trends to move towards the value of the trend line and then retreat away from it. And this shows some trend weakness — but it is not, by itself, an indication of an end of the uptrend.

The third technical feature is the consistent behavior of oil price as it moves in trading bands. Oil has a well-established pattern of moving in trading bands around $11 wide.

Applying trade band projection methods gave a target near $76. This has been achieved and the pullback from that price level is an expected part of the trading band pattern. A breakout above the $76 level gives an upside target near $87.

A strong bullish trend continuation is shown when price is able to move above resistance near $76 and above the value of the trend line. This would signal that the trend line is again acting as a support feature.

All the support features and the trend strength continue to suggest that oil price is experiencing a temporary retreat. The longer term trading band target is near $87, so traders will buy in anticipation of trend continuation.

The ANTSYSS trade method is used to extract good returns from this trend behavior.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

WATCH: Here’s what drives the price of oil

We suggested in August that traders who went short gold in May were beginning to consider covering their short positions.

The consolidation over the past few weeks has triggered short covering, but it has not encouraged new long positions.

When the gold price rebounds, it tends to do so rapidly without any consolidation activity. The gold price is characterized by trend rebounds from pivot point lows. Those are steep and rapid rebounds that have the characteristics of a short-term rally but also have a habit of developing into longer-term sustainable trends.

That has not developed. Gold made a plunging low in late August with a dip to $1,168. Historically, such dips have been followed by a rapid rebound, but that has not developed. Instead, there has been a period of sideways consolidation.

Evidence of a potential pivot point rally rebound includes two features.

The first bit of evidence would be a slowing of downward momentum. The range from low to high for the week is significantly smaller than the previous weekly ranges. That did develop.

The second feature indicating a potential rally would be a fast rebound with a significantly larger weekly low-to-high range: a large green candle that follows a very much smaller red candle. That did not develop and is the key clue to the continuation of the downtrend.

In other words, the consolidation pattern is a pause pattern rather than a reversal pattern.

The short-term group of averages in the Guppy Multiple Moving Average indicator were well separated. That shows traders are not optimistic about the potential for a trend change.

The long-term GMMA has crossed over and is continuing to develop steady separation. Those are bearish features that signal a continuation of the current downtrend.

The downside target is near $1,130 and is based on the value of the previous pivot point low rebound recovery in 2016.

Traders who covered shorts as the consolidation developed will now look to open short position again if the price dips below $1,180.

Traders continue to trade the retreat behavior. We use the ANTSSYS trading method for this.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.

A few weeks ago I noted the market contradiction between the and the .The stock market was making new 10-year highs but the currency was posting significant lows.

There was a contradiction, and a question arose: Who is the dominant partner in this relationship?

Well the answer is now in, and it’s the Australian dollar.

The collapse of the AUD pointed the way for the substantial retreat in the Australian market. As much as Australians like to think that U.S. President Donald Trump’s trade battles have no impact on their country, the reality is very different. Australia, a close ally of the U.S., is just so much collateral damage.

The Australian market is not immune from self-inflicted wounds, too. The misconduct in the banking and insurance sectors being revealed by the Hayne Royal Commission is undermining the companies that make up the bulk of the Australian market index.

Traders who were alert for evidence of a pullback in the Australian market went short as the Aussie dollar failed to hold support near $0.74. The AUD is a lead indicator for the Australian market.

The Australian dollar broke the long-term uptrend in April and quickly developed a substantial downtrend. It reached 12-month lows at $0.74 and rapidly reached two-year lows near $0.715.

A fall below $0.74 has a downside target near $0.715. That target is established using the support area tested in 2016 and 2017. The consolidation near $0.715 is weak. The short-term GMMA is well separated, suggesting that traders are committed sellers.

There is a low probability of a rally rebound toward $0.74. Traders fade the rally for a move toward the next support level near $0.69.

There is a weak relationship between Australian dollar weakness and U.S. dollar strength. Rather, the impact on the Australian dollar flows from revelations about the country’s financial sector and the fallout from Trump’s ramping up for tariffs. What hurts China hurts Australia and that’s before tariffs are directed specifically at Australia.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders, which can be found at www.guppytraders.com. He is a regular guest on CNBC Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe. He is a special consultant to AxiCorp.

For more insight from CNBC contributors, follow @CNBCopinion on Twitter.