Global oil prices witnessed a decline of more than 2% on Wednesday as concerns about supply disruptions due to Middle East conflicts eased. This retreat comes a day after Saudi Arabia, the top producer within OPEC, made a pledge to help stabilize the oil market.
Brent crude futures fell by $1.83 or 2.1% to settle at $85.82 per barrel. Meanwhile, U.S. West Texas Intermediate (WTI) crude declined by $2.48 or 2.9% to settle at $83.49.
Oil prices had surged by more than $3.50 per barrel on Monday due to concerns that the ongoing clashes between Israel and the Palestinian Islamist group Hamas might escalate into a broader conflict, potentially disrupting global oil supplies.
Prices experienced a slight drop on Tuesday following Saudi Arabia’s announcement that it was collaborating with regional and international partners to prevent further escalation and reaffirming its commitment to market stability.
Tamas Varga, an analyst at PVM, commented on the situation, stating that “Both WTI and Brent retreated yesterday as concerns of a sudden and unexpected supply disruption have been swept aside for now.
Mercuria, a prominent trading house, warned that oil prices could reach $100 per barrel if tensions in the Middle East escalate further, emphasizing the growing challenges facing the global economic recovery.
Edward Moya, a senior market analyst at OANDA, noted the uncertainties surrounding the global economic landscape, with concerns about weakening U.S. consumer sentiment and Germany’s potential slide into a deeper recession.
In Europe, the German government confirmed its anticipation of a 0.4% contraction in the economy for this year due to persistently high inflation.
Russia and Saudi Arabia held discussions in Moscow, with Russian President Vladimir Putin emphasizing the need for continued OPEC+ coordination to maintain oil market predictability. OPEC+ is a collaboration between the Organization of the Petroleum Exporting Countries (OPEC) and its allied partners, including Russia.
Putin also urged companies to prioritize the Russian domestic market and rolled back the ban on gasoline and some diesel exports that had been in place, permitting diesel exports arriving at ports via pipelines.
In the U.S., producer prices rose more than expected in September, primarily due to increased costs for energy products and food. However, underlying inflationary pressures at the factory gate appeared to be moderating.
Investors in the United States eagerly await the release of the Federal Reserve’s minutes from its September policy meeting, which may offer insights into future interest rate decisions. Interest rate hikes, typically employed to combat inflation, can potentially slow economic growth and reduce oil demand.
U.S. Treasury Secretary Janet Yellen expressed her expectation of a “soft landing” for the U.S. economy, despite “additional concerns” arising from the situation in Israel.
Uncertainty surrounding the direction of the U.S. economy prompted Federal Reserve officials to adopt a cautious stance during their September meeting, as revealed in the meeting’s minutes.
The U.S. Energy Information Administration (EIA) projected that global oil inventories would decrease by 200,000 barrels per day in the latter half of 2023, mainly due to voluntary output cuts by Saudi Arabia and reduced production targets within OPEC+ countries.
Exxon Mobil (NYSE:XOM) announced its acquisition of U.S. rival Pioneer Natural Resources (NYSE:PXD) in an all-stock deal valued at $59.5 billion, solidifying its position as the largest producer in the Permian Basin, the largest U.S. oilfield.
A Reuters poll of analysts predicted a 500,000-barrel increase in U.S. crude inventories for the week ending October 6.
Data from industry sources indicated a rise of approximately 12.9 million barrels in U.S. crude stocks for the same week, according to the American Petroleum Institute (API). The U.S. Energy Information Administration (EIA) is scheduled to release official stockpile data on Thursday.