Ahead of this week’s significant meetings of world central banks, including the U.S. Federal Reserve, oil prices slightly increased in Asian trade on Wednesday. The market was also careful about the most recent developments in the Israel-Hamas conflict.
After dropping more than 1% on Tuesday, Brent January crude futures increased 0.8%, or 66 cents, to $85.68 a barrel at 0726 GMT. The contract expiration saw Brent December futures close 4 cents down at $87.41 a barrel.
After falling almost 1.6% in the previous session, U.S. West Texas Intermediate oil futures rose 0.6%, or 52 cents, to $81.54 per barrel.
Senior market analyst at OANDA Edward Moya stated, “Crude prices are steadying ahead of a key issuance update by the Treasury and FOMC rate decision,” alluding to the FOMC, which determines the course of U.S. monetary policy.
“Geopolitical risks remain, and that seems to be offsetting some of the record production levels that are coming from the U.S.”
Fuel stocks decreased by around 360,000 barrels last week. Still, crude oil inventories increased by approximately 1.3 million barrels in the United States, according to market sources quoting American Petroleum Institute data on Tuesday. About 2.5 million barrels less were in distillate inventories.
While rate cuts to encourage spending may result in an increase in oil consumption, interest rate rises intended to control inflation may delay economic development and lower oil demand.
According to a survey conducted by CME’s Fedwatch tool, the Fed, which concludes its meeting on Wednesday, is anticipated to keep interest rates unchanged. According to a Eurostat flash estimate, October inflation in the Eurozone was 2.9%, down from 4.3% in September. This was the lowest level of inflation in the Eurozone in two years, raising doubts about an impending interest rate rise by the European Central Bank.
On Thursday, the Bank of England will convene. A private poll released on Wednesday revealed that manufacturing activity in China unexpectedly fell in October. This finding added to the negative government statistics released the day before and raised concerns about the country’s precarious economic recovery at the beginning of the fourth quarter. The most significant importer of oil in the world is China.
Taking a longer perspective, Goldman Sachs analysts predict that as stockpiles gradually decline, Brent prices will hit $100 per barrel by June of next year.
The market is now tightening at a modest rate, but the experts noted that it “may become very tight in a more distant future,” with productivity and oil demand trends playing a crucial role as well.
In the Middle East, Israeli airstrikes on Tuesday killed at least 50 Palestinians, including a Hamas leader, in a heavily populated refugee camp in the Gaza Strip.
The United States and other nations are considering “a variety of possible permutations” for the future of the Gaza Strip if Hamas terrorists are driven out of power, according to U.S. Secretary of State Antony Blinken, who is scheduled to visit Israel on Friday.
