Oil prices dip ahead of Biden visit to Israel

Fears that conflict in the Middle East could widen

Tue, 17 Oct, 2023 - 19:05

Crude oil prices edged lower as investors wait to see if US diplomatic efforts and a trip by president Joe Biden to Israel will prevent the conflict in the Middle East from widening.

Brent crude traded at $89.50 late on Tuesday. Oil prices rallied last week on fears that the Israel-Hamas conflict could widen into the oil-producing region. Global benchmark Brent had gained 7.5% in its largest weekly gain since February.

Mr Biden's visit to Israel will seek to balance showing support for Israel's war on Hamas and trying to rally Arab states to help to prevent a regional conflict, after Organization of the Petroleum Exporting Countries (Opec) member Iran pledged "pre-emptive action" from the "resistance front" of its allies that include the Hezbollah movement in Lebanon.

"Oil prices are wavering as energy traders await to see if the US diplomatic efforts will be successful in preventing the Israel-Hamas conflict from turning into a wider regional war," said Edward Moya, senior market analyst at Oanda.

Providing some support to prices, US retail sales increased more than expected in September as US households stepped up purchases of motor vehicles and spent more at restaurants and bars.

Venezuela

Weighing on prices with the possibility of increased supply, Venezuela's government and opposition are set to resume long-suspended talks, which could lead to Washington easing sanctions.

Since 2019, the US has imposed sanctions on oil exports from Venezuela, a member of Opec, to punish president Nicolas Maduro's government following elections in 2018 that Washington considered a sham.

The US government has been seeking ways to increase the flow of oil to world markets to alleviate high prices. However, any real oil output increase by Venezuela will take time because of a lack of investment.