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NEW YORK: Oil prices fell over 2% on Wednesday as fears of disruption to supplies due to conflict in the Middle East receded a day after top OPEC producer Saudi Arabia pledged to help stabilise the market.

Brent futures fell $2.10, or 2.4%, to $85.55 a barrel by 10:41 a.m. EDT (1441 GMT). U.S. West Texas Intermediate (WTI) crude fell $2.55, or 3.0%, to $83.42.

Brent and WTI had surged more than $3.50 on Monday on concern the clashes between Israel and Palestinian group Hamas could escalate into a broader conflict that could disrupt global oil supply.

Prices settled slightly lower on Tuesday after Saudi Arabia said it was working with regional and international partners to prevent an escalation, and reaffirmed its efforts to stabilise oil markets.

“We’ve taken 6.4% of the refinery utilization rate off the table in the last three EIA (U.S. Energy Information Administration) reports… That’s over 1,000,000 barrels that didn’t go through the refinery,” said Bob Yawger, director of energy futures at Mizuho, a bank.

Oil prices down on easing concerns

Moreover, in the higher rates environment moving forward that “could put the brakes on the upside as far as crude oil,” Yawger said.

Interest rate hikes to tame inflation can slow economic growth and reduce oil demand.

Exxon Mobil agreed to buy U.S. rival Pioneer Natural Resources in an all-stock deal valued at $59.5 billion that would make it the biggest producer in the Permian shell, the largest U.S. oilfield.

“Both WTI and Brent retreated yesterday as concerns of a sudden and unexpected supply disruption have been swept aside for now,” PVM analyst Tamas Varga said.

Trading house Mercuria sees oil prices reaching $100 a barrel if the situation in the Middle East escalates further, deputy CEO Magid Shenouda said on Wednesday.

Russia and Saudi Arabia met in Moscow on Wednesday, when Russian president Vladimir Putin said that OPEC+ coordination will continue “for the predictability of the oil market.”

OPEC+ is the partnership between the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia.

Putin also urged companies to prioritise the Russian domestic market. The country’s ban on gasoline and some diesel exports was rolled back again last week as diesel exports that arrive at ports by pipeline were permitted.

Elsewhere, investors will be looking ahead to the release of the U.S. Federal Reserve’s September policy meeting minutes due later on Wednesday for clues on future interest rate decisions.

U.S. Treasury Secretary Janet Yellen said that she still expected the U.S. economy to experience a soft landing, despite “additional concerns” brought about by the situation in Israel.

In Europe, the German government confirmed it expects the economy to contract by 0.4% this year because of persistently high inflation.

Global energy consumption will likely increase through 2050 and outpace advances in energy efficiency, the U.S. EIA said in an outlook.

The EIA will release its oil supply and demand expectations for the U.S. later Wednesday.

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