WTI trades inside Monday’s range despite persistent oil supply risks

• The oil price remained choppy from Tuesday as investors await further development in Middle East tensions.
• Iraq and Yemen military threatened to target the US if it intervened in Middle East conflicts to support Israel.
• Neutral commentary from Fed policymakers has sent the US dollar on the backfoot.

West Texas Intermediate (WTI), futures on NYMEX, remain choppy around $85.00 as investors watch for further development in the Israel-Hamas conflict. Other Middle-East countries favor Palestine's attack on Gaza to invade Israel while Western nations continue supporting Israel and promised to provide military aid.

No matter which nation gains the upper hand in the conflict, the oil market is expected to remain tight as the supply chain would be disrupted amid the war situation. Russian Deputy Prime Minister Alexander Novak is scheduled to meet with Saudi Arabia’s Energy Minister Prince Abdulaziz bin Salman later on Wednesday. Ahead of the meeting, Russian Nova said that “Russia and Saudi Arabia will discuss oil market situation and oil prices,” TASS news agency reported. He warned that the deepening war situation in Gaza could affect the oil market.

The expectations of an intervention in the Israel-Hamas bellicose by Iran could escalate the risk of a squeeze in the oil supply. If Iran actively supports the Palestine military group, the US could levy sanctions on Iranian oil, which could dampen the oil supply for the entire 2024.

Meanwhile, military troops from Iraq and Yemen have aligned with Iran and have threatened Washington if it intervenes to support Israel, Reuters reported.

The US Dollar remains on the backfoot as Federal Reserve (Fed) policymakers support keeping interest rates unchanged in November due to rising US Treasury yields.

San Francisco Fed Bank President Mary Daly said that the risk of little over-tightening is not expected to outweigh the risk of raising rates too much. She further added, that higher long-term US Treasury yields could substitute the need for further policy-tightening making borrowing expensive, which could lead to lower spending and investment.

Meanwhile, investors await the oil inventory data for the week ending October 6 to be reported by the American Petroleum Institute (API) at 20:30 GMT.