NEW YORK: Oil prices edged lower on Tuesday 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 futures fell 7 cents to $89.58 a barrel by 12:43 p.m. (1643 GMT). US West Texas Intermediate crude (WTI) fell 19 cents to $86.47.
Oil prices fell after earlier gains when Richmond Federal Reserve Bank chief Thomas Barkin said that higher long-term US borrowing costs are putting downward pressure on demand but it was unclear how that will affect the central bank’s rates decision in three weeks.
Interest rate hikes to curb inflation can slow economic growth and reduce oil demand.
Both oil benchmarks rallied last week on fears that the Israel-Hamas conflict could widen into the oil-producing region. Global benchmark Brent gained 7.5% in its largest weekly gain since February.
Biden’s visit to Israel on Wednesday will seek to balance showing support for Israel’s war on Hamas and trying to rally Arab states to help prevent a regional conflict, after OPEC-member Iran pledged “pre-emptive action” from the “resistance front” of its allies that include the Hezbollah movement in Lebanon.
“The market is really tight right now and that’s why we’re so nervous,” Phil Flynn, an analyst at Price Futures Group, said.
“Even if OPEC raised production, the most they could raise production is by 3 million barrels a day. That’s a scary number,” Flynn said.
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