WTI surges above $87.30 as tensions escalate in the Middle East

Western Texas Intermediate (WTI), the US crude oil benchmark, is trading around $87.35 so far on Wednesday. A surge in oil prices is bolstered by the escalating tension in the Middle East after hundreds were killed in a blast at a Gaza hospital, which triggered the fear of potential oil supply disruptions.

On Tuesday, Gaza authorities said that an Israeli air attack killed 500 people at a hospital in the Palestinian territory, while Israel stated the damage was caused by a Palestinian barrage. Following the strike, Palestinian President Mahmoud Abbas canceled a meeting with Biden, while Jordan's King Abdullah canceled a conference that was intended to bring Biden together with Egyptian and Palestinian leaders. That said, rising geopolitical tension in the Middle East might trigger the fear of potential oil supply disruptions and lift WTI prices higher.

The latest economic data from China indicated the recovery in the second’s world largest economy. On Wednesday, China’s Gross Domestic Product (GDP) for the third quarter (Q3) climbed 1.3% QoQ from a 0.8% expansion in the previous reading, stronger than the expectation of 1%. On an annual basis, the growth number grew to 4.9% versus 6.3% prior, beating the estimation of 4.4%. The stronger Chinese growth figures boost WTI prices as China is the world’s major energy consumer.

Apart from this, the American Petroleum Institute (API) reported on Tuesday that US crude oil inventories fell nearly 4.383M barrels for the week ending October 13 from the previous reading of 12.93M barrels rise. That was significantly steeper than the 300K barrel decline estimated by analysts.

Looking ahead, oil traders will monitor the weekly EIA Crude Oil stockpiles report due on Wednesday. Also, the US Housing Starts and Building Permits will be released from the US docket later on Wednesday. The Fed speakers this week, including Waller, Williams Bowman, and Fed Chair Powell might offer some hints about further monetary policy paths. These events could significantly impact the USD-denominated WTI price. Oil traders will take cues from the data and find trading opportunities around the WTI prices.