Oil prices edge higher amid geopolitical tensions

October 11, 2023 (MLN): Oil prices inched up on Wednesday as the market weighed supply disruptions amid the Israel-Palestine conflict that unfolded over the weekend.

Brent crude is currently trading at $87.12 per barrel, up by 0.11% on the day.

While West Texas Intermediate crude (WTI) is trading at $84.68 per barrel, up by 0.21% on the day.

It is pertinent to note that both benchmarks surged by over 4% on Monday due to the Middle East turmoil.

Israel produces very little crude oil, but markets are worried that the conflict could escalate and hurt Middle East supply, worsening an expected deficit for the rest of the year, as Reuters reported.

"There is still a risk that this escalates, particularly if there is any Iranian involvement. Under this scenario, stronger enforcement of U.S. sanctions on Iranian oil would tighten up the oil market through 2024," said Warren Patterson and Ewa Manthey, analysts from ING bank, in a note to clients.

Top oil exporter Saudi Arabia said on Tuesday it is stepping up efforts with partners to prevent the escalation of the situation in Gaza and neighboring areas, and reaffirmed its support to stabilise oil markets.

Against a basket of currencies, the dollar eased to a two-week low at 105.75 as the market waited for the U.S. Federal Reserve's September policy meeting minutes due later on Wednesday.

A weaker dollar makes crude cheaper for holders of other currencies, which could drive up oil demand.

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

In a more positive sign for supply, Venezuela and the U.S. have progressed in talks that could provide sanctions relief to Caracas by allowing at least one additional foreign oil firm to take Venezuelan crude oil under some conditions.

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