Worries that the Middle East conflict may disrupt oil supply and the impending announcement by the U.S. Federal Reserve, which may provide indications about future interest rates, caused oil prices to rise by around 2% on Wednesday.
By 10:50 a.m. EDT (1450 GMT), Brent futures for January delivery had increased by $1.63, or 1.9%, to $86.65 per barrel. However, the January contract closed on Tuesday at a lower price than the December contract.
The U.S. Energy Information Administration (EIA) said energy firms added 0.7 million barrels of crude into stockpiles during the week ended Oct. 24, which was lower than the 1.3 million barrel build analysts forecast in a Reuters poll and the 1.3 million barrel build the American Petroleum Institute (API), an industry group, reported a day earlier.
“Nothing that was really out of line with expectations,” Price Futures Group analyst Phil Flynn told Reuters. “It wasn’t really enough to move the needle here. Crude storage is not up as much as market was expecting.”
“The market will continue to be dominated by headlines out of the Middle East and fears that the conflict will spread resulting in a supply disruption that either keeps Iranian oil off the market or Iran takes steps to restrict flows through the Strait of Hormuz,” said Andrew Lipow, president of Lipow Oil Associates in Houston.
In Gaza, a first group of injured people were evacuated to Egypt, a source and Egyptian media said, as Israeli forces pressed their battle against Hamas militants.
Iran’s Supreme Leader Ayatollah Ali Khamenei called on Muslim states to cease oil and food exports to Israel, demanding an end to its bombardment of the Gaza Strip, state media reported.
Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), produced around 2.5 million barrels per day of crude in 2022, according to U.S. energy data.
Callum Macpherson, head of commodities at Investec, said that if there is no threat to output from the war, “oil may struggle to sustain prices around recent highs without support from OPEC+ into 2024, making their meeting later this month crucial.”