Oil slips after huge jump due to attack on Israel

London — Oil prices edged lower on Wednesday, as fears of disruption to supplies due to conflict in the Middle East receded, at least for the time being.

Brent crude fell 49c, or 0.56%, to $87.16 a barrel by 10.02am GMT. US West Texas Intermediate (WTI) crude fell by 55c, or 0.64%, to $85.42.

Brent and WTI had surged more than $3.50 on Monday on concern the military clashes between Israel and Palestinian Islamist group Hamas could escalate into a broader conflict, but settled slightly lower in Tuesday’s session.

“Both WTI and Brent retreated yesterday as concerns of a sudden and unexpected supply disruption have been swept aside for now,” PVM analyst Tamas Varga said.

But Swiss trading house Mercuria sees oil prices reaching $100 a barrel if the situation in the Middle East escalates further, deputy CEO Magid Shenouda said on Wednesday.

Israel produces very little crude oil and has a refinery capacity of about 297,000 barrels per day, but markets are worried that the conflict could broaden and disrupt wider Middle East supply, worsening an expected deficit for the rest of 2023.

Saudi Arabia said on Tuesday it was working with regional and international partners to prevent the escalation of the situation in Gaza and neighbouring areas, and reaffirmed that it supported efforts to stabilise oil markets.

Russia and Saudi Arabia met in Moscow on Wednesday, where the oil market and Opec+ collaboration were discussed.

Kremlin spokesperson Dmitry Peskov said on Wednesday it is difficult to overestimate Russia’s co-ordination with Saudi Arabia and other partners on the oil market.

Elsewhere, investors will be looking ahead to the release of the US Federal Reserve’s September policy meeting minutes due later on Wednesday for clues on future interest-rate policy decisions.

Several Fed officials in recent days have suggested that the US central bank doesn’t need to raise borrowing costs any further.

US treasury secretary Janet Yellen said on Wednesday that she still expects the US economy to experience a soft landing, despite “additional concerns” brought about by the situation in Israel. 

Reuters