Wednesday saw a notable rise in oil prices, with a 2% increase as the market’s attention is drawn to the upcoming U.S. Federal Reserve meeting. Investors are eager for hints about future interest rate decisions. Meanwhile, ongoing tensions in the Middle East continue to capture global attention. Brent oil, a global benchmark, jumped by $1.68 to $86.70 per barrel, while U.S. West Texas Intermediate (WTI) increased by $1.72 to $82.74.
Rate Decisions in the Spotlight
The Federal Reserve’s meeting concludes today, with expectations leaning towards maintaining the current interest rates. Across the Atlantic, the latest data suggests inflation in the Eurozone has dipped to a two-year low, suggesting that the European Central Bank may not raise interest rates soon. The Bank of England is also set to convene tomorrow.
Higher interest rates are often used to combat inflation but can lead to slower economic growth and reduced oil demand.
Economic Developments and Oil Demand
China, the world’s top oil buyer, showed signs of economic strain with factory activity shrinking unexpectedly in October. This downturn echoes the somber government data released earlier, casting doubt on China’s economic rebound. Despite the heightening conflict in the Middle East, oil supply disruptions have not yet materialized. This stability comes even as U.S. oil production hits record levels and China’s economic data signals a downturn.
In the Middle East, the conflict has escalated, but there’s a glimmer of humanitarian relief as the first group of wounded individuals were moved out of Gaza to Egypt. Meanwhile, Iran’s Supreme Leader called on Muslim nations to stop oil and food shipments to Israel in response to the ongoing conflict. According to Callum Macpherson from Investec, if the Middle East conflict doesn’t worsen or threaten oil production, prices may have difficulty holding at recent highs. This puts the spotlight on the upcoming OPEC+ meeting, which could be decisive for future oil pricing strategies.
