Oil edges lower as the conflict in Gaza remains contained

Oil prices extended losses on Tuesday, with WTI price dropping below the $82.0 per barrel level. If WTI price declines, it may encounter support near $77.6 per barrel, while resistance may be found near $91.0 per barrel.

Oil prices have been supported by geopolitical risks in the past few weeks. The crisis between Israel and Hamas continues, propping up oil prices. Especially fears of a potential Iranian involvement are buoying oil prices. This week, however, fears that the war would disrupt oil supply eased, and oil prices slipped. Even as Israel’s military invades Gaza, the crisis seems to be contained so far and risks of the war spreading in the region abate. 

Oil prices are kept in check by a strong US dollar and high-interest rates. The Fed decided to pause rate hikes at its September policy meeting and has likely reached its rate ceiling. This week, all eyes are going to be on the Fed monetary policy meeting on November 1st. Markets widely expect the Fed to hold rates steady this week, and market participants will focus mostly on the Fed’s forward guidance. Even if the Fed has reached its interest rate ceiling though, rates are likely to stay high for longer, driving oil demand outlook and oil prices down. 

OPEC+ kept its output policy unchanged at its latest meeting, maintaining its recent cuts by Russia and Saudi Arabia, which have already been extended till the end of the year. 

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Written by:
Myrsini Giannouli

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