Oil bobs in the green, awaiting US stockpiles data and other catalysts

Crude prices were back in the positive in Wednesday’s Asian session, trading a few cents above the lower close of the previous day, as the hunt for leads continued in a market left directionless by oil’s all-too-brief rally on the latest Middle East crisis.

US West Texas Intermediate, or WTI, crude for delivery in November was up 23 cents, or 0.3%, at $86.20 per barrel by 12:07 in Singapore (00:07 Eastern US). It had closed down 41 cents, or 0.5%, on Tuesday.

UK-based Brent crude for the most-active December contract was up 31 cents, or 0.4%, at $87.96. It finished Tuesday’s session down 50 cents, or 0.6%.

Both WTI and Brent rose just over 4% on Monday, with markets on red alert over fears of political and economic contagion from the fighting ignited by Saturday’s attacks by Palestine militant group Hamas on Israeli people and targets in Gaza.

But 24 hours later, global markets had calmed down meaningfully, with risk-on fervor pushing up stocks on Wall Street. Crude prices, meanwhile, fell as traders hit the pause button on the market’s advance to better assess the direct impact from the conflict.

Specifically, traders said there were no credible estimates on how many barrels of oil produced, traded or shipped out of the Middle East would be stranded by the latest tensions in the region. Another unanswered question was whether Iran had instigated or sponsored the attack on Israel in some way.

As of Tuesday, the US State Department said Iran likely knew that Hamas was planning operations against Israel, but without the precise timing or scope of what occurred. That did not make it sound like the Biden administration had made targeting Iran a priority even as it had reached out to Israel with promises of new aid. To analysts, that was essentially bearish for oil prices.

Since late 2022, Washington has turned a blind eye to surging Iranian oil exports, bypassing American sanctions. The priority in Washington was an informal détente with Tehran so as to allow the world more oil supply to offset output cuts by the producer group OPEC+.

As a result, Iranian crude output is estimated to have surged nearly 700,000 barrels a day this year – the second-largest source of incremental supply in 2023, behind only US shale oil.

All eyes on Fed minutes, US oil stockpiles data
Still oil might see more action later in the day, potentially to the upside, if minutes from the Federal Reserve’s policy meeting for September — due to be released during the US trading session — shows officials of the central bank veering towards another hold on rate hikes in November.

Minneapolis Fed President Neil Kashkari said on Tuesday a rate hike might not be needed to cap inflation as a bond market selloff could do the central bank’s work in tempering rising prices — despite strong labor and wage growth. Atlanta Fed President Raphael Bostic, meanwhile, said US monetary policy was restrictive enough at this point that no more rate hikes were needed.

Market participants will also be on the lookout for US weekly oil inventory data, due after market settlement from the API, or the American Petroleum Institute.

The API will release at approximately 16:30 ET (21:30 GMT) a snapshot of closing balances on US crude, gasoline and distillates for the week ended Oct. 6. The numbers serve as a precursor to official inventory data on the same due from the U.S. Energy Information Administration on Wednesday.

For last week, analysts tracked by Investing.com expect the EIA to report a crude stockpile drop of 0.37 million barrels, versus the 2.224-million barrel reduction reported during the week to Sept. 29.