Oil prices rebounded to a relatively steady trade on Wednesday as markets priced in risks from the conflict in the Middle East and investors monitored US stockpile data for cues about the demand trajectory of the world’s largest oil-consuming country.
International benchmark crude Brent traded at $88.08 per barrel at 10.48 a.m. local time (0748 GMT), a 0.49% gain from the closing price of $87.65 a barrel in the previous trading session on Tuesday.
The American benchmark West Texas Intermediate (WTI) traded at the same time at $86.33 per barrel, up 0.42% from Tuesday’s close of $85.97 per barrel.
After rallying more than 5% since the start of the week due to supply fears sparked by the Palestine-Israel war, which erupted on Saturday and resulted in thousands of casualties, prices leveled out on Wednesday as markets had already priced in supply risks associated with the Middle East unrest.
Iran received a lot of attention as it declared its full support for Palestinian resistance groups fighting Israel. Regardless, Iran denied any involvement in the Hamas attacks on Israel, claiming that ‘the accusations linked to an Iranian role… are based on political reasons.’
Oil markets were relieved since supply from Iran, a major OPEC+ member, is required to meet rising demand in the post-pandemic era.
Nonetheless, there are concerns that the dispute would spread to other nations, considering that Saudi Arabia and Israel were holding discussions to repair relations through US mediation.
Saudi Arabia and Israel have no diplomatic relations, and Riyadh insists that any agreement to normalize ties with Tel Aviv include a component to advance efforts to establish a Palestinian state, concessions that Israel has so far flatly rebuffed.
The deal, which would include a key mutual defense pact and weapons deal with Washington, would also see Saudi Arabia boost oil production next year.
However, US-based investment firm Goldman Sachs said the escalation would at least cause a temporary delay to the proposed normalization of Saudi-Israeli relations and an associated boost to Saudi production while maintaining its $100 per barrel Brent forecast by the end of the second quarter of 2024.
Investors are now looking forward to the release of US crude oil inventory data from the American Petroleum Institute (API) later on Wednesday and the Energy Information Administration (EIA) on Thursday.
If US stockpiles decline, prices will continue to increase as a draw in inventories signals bullish demand in the world’s largest oil-consuming country.
