Oil futures: Crude rebounds as Middle East tensions simmer

Quantum Commodity Intelligence – Crude oil futures late Wednesday were surging higher after markets initially steadied after dipping to two-week lows in the previous session, while Middle East tensions continue to brew.

Front-month Dec23 ICE Brent futures were trading at $89.93/b (1825 GMT), compared to Tuesday's settle of $88.07/b, while the more-liquid Jan23 contract was trading at $88.88/b.

At the same time Dec23 NYMEX WTI was trading $85.21/b versus Tuesday's settle of $83.74/b.

Prices came under pressure during the first half of the week, with the Middle East conflict so far not disrupting any regional oil supplies, while the firmer US dollar and weak European data added to the softer outlook.

A Wall Street Journal report claimed Wednesday that Israel had agreed, for now, to a request from the US to delay its planned ground invasion of Gaza, allowing the US to get its air defenses in place to protect US troops in the region.

However, investors remain nervous that the Israel-Hamas war could still escalate into a wider conflict, causing potential supply disruptions.

"The Pentagon is scrambling to deploy nearly a dozen air-defense systems to the region, including for US troops serving in Iraq, Syria, Kuwait, Jordan, Saudi Arabia, and the United Arab Emirates, to protect them from missiles and rockets. US officials have so far persuaded the Israelis to hold off until those pieces can be placed, as early as later this week," the WSJ added.

Secretary of State Antony Blinken warned that the US would respond swiftly and decisively if Tehran or its proxy forces were to launch attacks on US personnel, following reports from US intelligence agencies of potential American targets.

Separately, Blinken has asked Qatar's prime minister to tone down the state-owned Al Jazeera's rhetoric about the Gaza war, the Axios news site reports.

The request to "turn down the volume on Al Jazeera's coverage because it is full of anti-Israel incitement" suggests that the US is concerned the Qatar-based network's coverage of the war is inflaming tensions in the region.

Meanwhile, the Wall Street Journal also reported that Saudi Arabia intercepted one of the cruise missiles fired toward Israel last week by Iran-backed Houthi rebels.

OPEC

OPEC has so far resisted calls to pump more oil after Brent prices soared above $90/b both this month and last, while hedge-fund manager Pierre Andurand said that Saudi Arabia is unlikely to increase output until headline prices are well into three digits.

"The Saudis will have to decide when and at what price to bring supply back. For me, an adjustment likely will come around $110 a barrel. So there's room to the upside for prices," said Andurand, speaking at the annual investment forum in Riyadh.

Oil prices also steadied after China rolled out fresh stimulus plans for certain areas of the economy, although the property sector remains troubled.

Latest data inventory data from the American Petroleum Institute also helped to halt the oil slide, revealing an across-the-barrel drop in stocks for a second consecutive week.

Crude stocks were 2.7 million barrels lower, while gasoline inventories were down over 4 million barrels and distillate stocks dropped 2.3 million barrels.

But this was followed by the EIA's weekly Petroleum Status Report, which put  commercial crude stocks at 421 million barrels in the week to 20 October, up 1.4 million barrels week-on-week.

Despite the increase, commercial inventories are still running around 8% below this time last year.