Oil Prices Rise Ahead of Key Central Bank Meetings and Israel-Hamas Conflict

Oil Prices Edge Up Ahead of Key Central Bank Meetings and Israel-Hamas Conflict Developments

Published on November 1, 2023,

In early Asian trade on Wednesday, oil prices saw a slight uptick as markets braced for pivotal central bank meetings and kept a close watch on the latest developments in the Israel-Hamas conflict.

Brent Crude Rises:

• Brent January crude futures rose by 0.3%, or 28 cents, to reach $85.30 a barrel by 0330 GMT, following a more than 1% drop on the previous day.
• Brent December futures settled 4 cents lower at $87.41 a barrel at the contract’s expiry on Tuesday.

WTI Crude Gains:

• U.S. West Texas Intermediate (WTI) crude futures gained 0.2%, or 16 cents, reaching $81.02 a barrel, after a 1.6% decline in the previous session.

Factors at Play:

• Edward Moya, a senior market analyst at OANDA, pointed out, “Crude prices are steadying ahead of a key issuance update by the Treasury and FOMC rate decision,” referring to the Federal Open Market Committee responsible for U.S. monetary policy.
• Geopolitical risks, particularly the Israel-Hamas conflict, continue to influence market sentiment and offset the record production levels coming from the U.S.

Inventory Data:

• Crude oil inventories in the U.S. increased by approximately 1.3 million barrels last week, while fuel stockpiles declined by about 360,000 barrels, according to American Petroleum Institute figures on Tuesday. Distillate inventories fell by about 2.5 million barrels.

Central Bank Meetings:

• The U.S. Federal Reserve, which is set to conclude its meeting on Wednesday, is widely expected to maintain its current interest rates, as indicated by a poll conducted by CME’s Fedwatch tool.
• In Europe, October’s inflation in the Eurozone dropped to 2.9%, the lowest level in two years, furthering expectations that the European Central Bank is unlikely to raise interest rates soon.
• The Bank of England is scheduled to hold its meeting on Thursday.

China’s Economic Concerns:

• In China, factory activity unexpectedly contracted in October, according to a private survey, raising questions about the country’s economic recovery at the beginning of the fourth quarter. This is of global significance as China is the world’s largest oil importer.

Long-Term Outlook:

• Goldman Sachs analysts have forecasted that Brent crude oil prices could reach $100 per barrel by next June, with a gradual decrease in stocks. They also noted that the market might become significantly tighter in the more distant future, contingent on productivity and oil demand trends.

Israel-Hamas Conflict:

• In the Middle East, Israeli airstrikes struck a densely populated refugee camp in the Gaza Strip on Tuesday, resulting in the tragic loss of at least 50 Palestinians and a Hamas commander.
• U.S. Secretary of State Antony Blinken, who is scheduled to visit Israel on Friday, mentioned that the U.S. and other countries are exploring various options for the future of the Gaza Strip should Hamas militants be removed from control.

The global oil market continues to be influenced by a complex interplay of economic, geopolitical, and supply-demand factors, making it a focal point of interest for investors and analysts worldwide.

• Inputs Reuters