Oil prices are rising, mainly due to geopolitical tensions in the Middle East. Brent North Sea crude for January delivery rose by 1.08% to $85.94 a barrel. A barrel of West Texas Intermediate (WTI) for delivery in the same month also gained, rising 1.16% to $81.96. This trend is being observed despite easing fears of a major conflict in the Middle East.
Geopolitical tensions in the Middle East
Analysts at Energi Danmark comment that market attention remains focused on the ongoing war between Israel and Hamas. However, they note that the risk premium initially factored in after the outbreak of war seems to be diminishing, as the market considers it increasingly unlikely that a major war involving Iran will break out.
Analysis of market trends
On Tuesday, WTI reached its lowest price in two months, at $80.74 a barrel, in reaction to Hamas’s announcement that it was prepared to free “a number of foreigners in the next few days”. Since October 7, the two world oil benchmarks have almost returned to their previous levels.
U.S. Oil Inventories
John Evans, of PVM Energy, stresses that it is still “too early” to rule out the possibility of a wider conflict, although fears have eased. Investors are also awaiting the release of weekly U.S. oil inventories by the U.S. Energy Information Agency (EIA) for the week ending October 27. Data from the American Petroleum Institute (API) showed an increase of around 1.35 million barrels of crude last week, while gasoline inventories fell by 357,000 barrels. However, API data is considered less reliable than EIA data.
In conclusion, oil prices continue to fluctuate due to geopolitical tensions in the Middle East. Although fears of a major conflict seem to be subsiding, the market remains alert to possible developments. Investors are also keeping an eye on the US Federal Reserve (Fed) and Chairman Jerome Powell’s speech, which could influence the economic outlook and, consequently, demand for oil.
