While oil prices rose in Asian trade on Wednesday ahead of key meetings this week of global central banks, including the US Federal Reserve, the market is closely monitoring the latest developments in the Israel-Hamas conflict.
Brent January crude oil futures rose 0.8%, or 66 cents, to $85.68 a barrel at 0726 GMT, after falling more than 1% on Tuesday. Brent December futures contract fell 4 cents to close at $87.41 a barrel when the contract expired on Tuesday.
West Texas Intermediate (WTI) crude oil futures rose 0.6%, or 52 cents, to $81.54 a barrel, after losing nearly 1.6% in the previous session.
Geopolitical risks remain and this appears to be offsetting some of the record production levels from the US. Crude prices remain stable ahead of a major issuance update by the Treasury and FOMC interest rate decision by the Federal Open Market Committee, which determines the direction of US monetary policy.
U.S. crude oil stocks rose by about 1.3 million barrels last week, while fuel stocks fell by about 360,000 barrels, according to market sources citing figures from the American Petroleum Institute (API) on Tuesday. Distillate stocks fell by about 2.5 million barrels.
Interest rate increases aimed at reining in inflation could slow economic growth and reduce oil demand; Interest rate cuts to encourage spending may increase oil consumption.
The Fed is expected to keep interest rates steady on Wednesday, according to a poll.
October inflation in the Eurozone fell to 2.9% from 4.3% in September, falling to the lowest level in two years. This has led to expectations that the European Central Bank will not increase interest rates anytime soon. The Bank of England will meet on Thursday.
China is the world’s largest oil importer. Factory activity in China unexpectedly contracted in October, a private survey showed on Wednesday, adding to pessimistic official figures from a day earlier. This has raised questions about the fragile economic recovery at the beginning of the fourth quarter.
From a longer perspective, analysts predict that Brent prices will reach $100 a barrel next June as oil inventories slowly decline.
Analysts say the market is currently tightening at a moderate pace, but may become very tight in the more distant future. But productivity and oil demand trends are also expected to be critical.
Israeli air strikes in the Middle East hit a densely populated refugee camp in the Gaza Strip on Tuesday, killing at least 50 Palestinians and a Hamas commander.
Blinken, who will visit Israel on Friday, said the United States and other countries are looking at “a variety of possible changes” for the future of the Gaza Strip if Hamas militants get out of control.