Oil prices rise on unexpected stockpile drawdown

Oil prices gained strength on Wednesday and WTI price rose from $67.8 per barrel to 69.4 per barrel. If oil prices retreat, they may encounter support near $66.9 per barrel, while resistance may be found near $72.8 per barrel.

US crude oil inventories released on Wednesday showed an unexpected drop in US crude stockpiles, boosting oil prices. The US Energy Information Administration reported a weekly crude stockpile draw of 0.5M barrels for the week to October 25th, against expectations of a 1.5M barrel build and following a rise of 5.5M barrels the week before.

The ongoing crisis in the Middle East threatens to disrupt oil distribution. Concerns of a broadening conflict in the Middle East are boosting oil prices. The conflict between Israel and Hamas continues to escalate, threatening to affect oil supply and distribution. In the past few weeks, markets had been bracing for Israel’s retaliatory attack against Iran, keeping oil prices up. Israel’s attack over the weekend, however, avoided Iran’s nuclear facilities and oil industry, causing oil prices to plummet.

 Israel launched a series of missiles against Iran but did not inflict substantial damage and was seen as a token retaliatory attack. The Iranian government announced that there would be an appropriate response to Israel’s attack, but Iran’s President emphasized that they do not seek a war with Israel. Signs that the crisis between Israel and Iran is de-escalating are putting pressure on oil prices. Israel’s attacks in Gaza and Lebanon have continued unabated this week, however, providing support for oil prices. 

Oil prices are also kept in check by high central banks’ interest rates. The Federal Reserve cut its benchmark interest rate by 50 basis points to a target range of 4.75% to 5.00% in September, after holding interest rates steady since last July. Market odds of a 25-bp rate cut in November are currently approximately 90%.

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Written by:
Myrsini Giannouli

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