Oil prices tally first gain in 4 sessions, but the ‘war in Gaza goes on’

Price action

• West Texas Intermediate crude for December delivery
  CL00,
  -2.00%

  CL.1,
  -2.00%

  CLZ23,
  -2.00%
  rose $2.02, or 2.5%, to settle at $82.46 a barrel on the New York Mercantile Exchange, after ending Wednesday at its lowest since Aug. 28.

• January Brent crude
  BRN00,
  +0.22%

  BRNF24,
  +0.22%,
  the global benchmark, gained $2.22, or 2.6%, to settle at $86.85 a barrel on ICE Futures Europe. It ended Wednesday at its lowest since Oct. 6, the last trading day before the Hamas attack. The gains for Brent and WTI crude Thursday followed three session declines in a row.

• December gasoline
  RBZ23,
  -1.96%
  tacked on 2.8% to $2.25 a gallon, while December heating oil
  HOZ23,
  -3.50%
  added 2.2% to $3.03 a gallon.

• Natural gas for December delivery
  NGZ23,
  +0.35%
  settled at $3.47 per million British thermal units, down 0.6%.

Market drivers

Oil bounced back on the “perception” that U.S. interest-rate hikes may have ended, but the “war in Gaza goes on,” said Phil Flynn, senior market analyst at The Price Futures Group.

Overall, a generally upbeat trading tone in global markets — with U.S. equities posting sharp gains, Treasury yields pulling back
BX:TMUBMUSD10Y
and a weaker U.S. dollar
DXY
after the Federal Reserve decided Wednesday to not raise interest rates — was helping to lift crude, market watchers said.

Also see: Why the Fed’s decision to hold rates steady could lift gold back above $2,000

“Post-Fed Treasury yields have been coming down, which has dragged on the U.S. dollar, removing a headwind from the price of oil and other commodities” Thursday, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.

See: Stocks rallied because Fed’s Powell didn’t ‘nudge’ markets harder on potential rate hike

Analysts continue to monitor the Israel-Hamas war for signs of a potential spillover that could involve Iran. Crude had rallied following the start of the war on fears that a wider conflict could see the U.S. more heavily enforce sanctions on Iranian crude exports, while a worst-case scenario could see Iran or its proxies threaten key transportation chokepoints and infrastructure in the region.

But prices have since retreated.

Read Israel-Hamas war has potential to fuel oil-price shock that can disrupt food security: World Bank

“We are back to levels last seen before the atrocity suggesting that traders don’t expect hostilities to spread,” David Morrison, senior market analyst at Trade Nation, said in a note.

That said, the threat of disruption to oil production, infrastructure or
logistics remains, analysts at Sevens Report Research said in a note.

“That threat will keep short sellers on their toes until there is a cease-fire called, leaving the market susceptible to potentially sizable short squeezes,” they wrote.

In other energy dealings, prices for natural gas finished lower after the U.S. Energy Information Administration reported Thursday that U.S. natural-gas supplies in storage climbed by 79 billion cubic feet for the week ended Oct. 27.

On average, analysts surveyed by S&P Global Commodity Insights forecast an increase of 83 billion cubic feet.