Oil steadies as spillover effects from Israel-Hamas conflict look contained

• Oil (WTI) steady at $84 after a calm Tuesday trading session.
• The US Dollar weakened after Fed officials commented about the end of the tightening cycle. 
• Sideways to lower price action is expected as several Oil-producing countries vowed for diplomacy amid current tensions in Gaza. 

Oil prices have quickly digested the volatile ride from Monday after violence erupted in Israel and the Gaza strip over the weekend. Markets were on edge about possible spillover effects from the conflict to the broader Middle East region, but  roughly 48 hours later it appears that Oil production is not at risk. 

Meanwhile, the US Dollar (USD) sees markets looking beyond recent developments in Israel and Gaza. It appears that several countries and participants around this war do not want to see further escalation of violence. This means, for now, a proxy war is out of the way. Safe-haven flows are starting to abate, with the Swiss Franc and the Greenback retreating to weaker levels.

Crude Oil (WTI) trades at $84.56 per barrel, and Brent Oil trades at $87.07 per barrel at the time of writing. 

Oil news and market movers

• Russia and Saudi Arabia will discuss Oil market prices on Wednesday, Russian Deputy Prime Minister Alexander Novak said.
• Saudi Energy Minister Prince Abdulaziz bin Salman will participate in the Russian Energy Week forum. The Saudi Energy Minister will meet with Deputy Prime Minister Novak in a breakout meeting during the convention.
• The US and Venezuela are close to reaching a deal that would ease any Oil and banking sanctions in return for ensuring fair elections next year. 
• With the recent cuts since the end of summer, OPEC+ countries have ample amount of spare production capacity to weather sudden supply shocks. 
• The American Petroleum Institute is due to release its weekly numbers at 20:30 GMT. The previous week recorded a drawdown of 4.21 million barrels. 

Oil Technical Analysis: All priced in

Oil prices are steady and trading sideways around the peak levels from Monday in the initial reaction to the war in Israel and Gaza. For now, price action looks to be underpinned by a small risk premium, though the current diplomatic stance from several nations in the region has defused quite a lot of tension around a possible higher Oil price. Expect to see some sideways price action with a possible dip lower once the conflict de-escalates. 

On the upside, the double top from October and November of last year at $93.12 remains the level to beat. Although it got breached on Thursday, Oil price didn’t close above it. Should $93.12 be taken out, look for $97.11, the high of August 2022.

On the downside, traders are bracing for the entry of that region near $78. The area should see ample support for buying. Any further drops below this level might see a firm nosedive move, which would cause Oil prices to sink below $70.

US Crude (Daily Chart)