Crude oil prices in the Asian session experienced slight gains, hovering a few cents above the previous day’s lower closing prices. The oil market remains relatively directionless, with traders actively seeking cues in the aftermath of a brief oil rally related to the recent Middle East crisis.
In the Asian session, US West Texas Intermediate (WTI) crude oil for November delivery was up 23 cents or 0.3% at $86.20 per barrel, after closing 41 cents down on the previous day.
Brent crude, the UK-based benchmark for the most-active December contract, gained 31 cents or 0.4% to reach $87.96. In the prior session, Brent crude saw a decrease of 50 cents, equating to a 0.6% decline.
On Monday, both WTI and Brent crude experienced gains of slightly over 4%, prompted by concerns of potential political and economic repercussions from the unexpected attack by Hamas militants on Israel over the weekend.
However, within 24 hours, the global market environment stabilized, sparking a risk-on sentiment that drove up Wall Street stocks. In contrast, oil prices declined as traders temporarily halted the market’s advance to better assess the direct impacts arising from the Middle East conflict.
Specifically, market participants cited the absence of credible estimates regarding the volume of Middle East oil production, trade, or shipments that might be disrupted by the latest tensions in the region. Additionally, questions remained unanswered about Iran’s potential involvement or sponsorship of the attack on Israel.
As of the previous day, the US State Department indicated that Iran likely had knowledge of Hamas’s plans to conduct operations against Israel but did not possess precise details regarding the timing or scope of the attack. This lack of concrete evidence did not position the Biden administration as focusing on targeting Iran as a priority. Market analysts interpreted this stance as a bearish factor for oil prices.
Since late 2022, the United States has turned a blind eye to surging Iranian oil exports, effectively bypassing American sanctions. Washington’s primary focus has been establishing an informal détente with Tehran to augment global oil supply, offsetting output reductions by the OPEC+ producer group.
As a result, Iranian crude output is estimated to have surged by nearly 700,000 barrels per day in the current year, positioning it as the second-largest source of incremental supply in 2023, second only to US shale oil.
Anticipating Moves Based on Fed Minutes and US Oil Stockpile Data
Oil prices may experience additional movement later in the day, possibly to the upside, if the Federal Reserve’s meeting minutes for September, due to be released during the US trading session, reveal central bank officials inclining towards holding off on rate hikes in November.
Minneapolis Fed President Neil Kashkari suggested that a rate hike might not be necessary to curb inflation, as a selloff in the bond market could naturally serve to temper rising prices, notwithstanding robust labor and wage growth. Additionally, Atlanta Fed President Raphael Bostic stated that US monetary policy had achieved a level of restriction that rendered further rate hikes unnecessary.
Market participants will also closely monitor the release of US weekly oil inventory data, due after the market’s closing, from the American Petroleum Institute (API).
API is expected to release a snapshot of closing balances for US crude oil, gasoline, and distillates for the week ending October 6, at approximately 16:30 ET (21:30 GMT). These figures offer a precursor to the official inventory data from the US Energy Information Administration, scheduled for release on the following day.
For the previous week, analysts tracked by Investing anticipate that the EIA will report a decrease in crude stockpiles by 0.37 million barrels, compared to a 2.224-million barrel reduction reported during the week ending September 29.