Oil settled near $86 after a choppy session as traders assessed the intensified diplomatic efforts by the US to contain the crisis in Gaza.
(Bloomberg) — Oil settled near $86 after a choppy session as traders assessed the intensified diplomatic efforts by the US to contain the crisis in Gaza.
West Texas Intermediate futures were unchanged after swinging in an almost $2 range on Tuesday. Biden will travel to Israel on Wednesday to show his support after the Oct. 7 attacks by Hamas that sparked the conflict. At the same time, markets remain on edge as Israel is still making plans for a ground offensive into Gaza.
Earlier, prices dropped more than 1% before paring its losses after Russia’s Central Bank reiterated expectations that OPEC+ may consider an increase in output at the beginning of 2024. Shortly afterward, Russian Deputy Prime Minister Alexander Novak said that it’s still too early to talk about what market decisions OPEC+ may take at its meeting in November.
“Traders remain on high alert” while oil remains in a holding pattern, said Rebecca Babin, a senior energy trader at CIBC Private Wealth. “Many investors are not willing to make outright bets on crude in the current environment but are actively buying upside call options in the event crude supply is impacted. It is a low conviction, highly volatile trading environment.”
Crude traders are also tracking events in Barbados, where Venezuela’s government is expected to sign a deal with the US-backed opposition later on Tuesday. In exchange for a freer presidential election next year, the agreement could pave the way for the US to ease sanctions against the country, potentially boosting oil exports.
The crude market has been left on edge by the crisis in the Middle East and the risk that it spreads beyond Israel and Gaza, potentially endangering crude flows from key producers. Iran, which supports Hamas, has warned that an expansion of the war was “approaching the inevitable stage.” In addition to roiling futures markets in recent days, the conflict has also upended options pricing and sent freight costs soaring.
Looking ahead, the path of least resistance seems to be to the upside, Fawad Razaqzada, a market analyst at StoneX, said in a note. WTI’s technical support levels are between $84.10 to $85.45, with crude futures likely to find resistance from $87.15 to $87.95, he said.
Terminal users can click here for more on the Israel-Hamas War.
–With assistance from Francine Lacqua.
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