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© Reuters. An aerial view shows an oil factory of Idemitsu Kosan Co. in Ichihara, east of Tokyo, Japan November 12, 2021, in this photo taken by Kyodo. Picture taken on November 12, 2021. Mandatory credit Kyodo/via REUTERS/File Photo
By Natalie Grover
LONDON (Reuters) -Oil prices rose more than 2% on Wednesday ahead of the keenly watched meeting of the U.S. central bank for clues on interest rate policy, while the conflict in the Middle East remains in focus.
January crude futures were up about 2.5%, or $2.08, to $87.10 a barrel by 1316 GMT. U.S. West Texas Intermediate crude futures gained roughly 2.8%, or $2.24, to $83.26 a barrel.
The Fed, which will end its meeting on Wednesday, is widely expected to hold rates steady.
In Europe, October inflation in the Euro zone was at its lowest level in two years, a Eurostat flash reading showed, leading to expectations the European Central Bank is unlikely to hike interest rates soon. The Bank of England is expected to meet on Thursday.
Interest rate hikes aimed at taming inflation can slow economic growth and dampen oil demand.
In China – the world’s largest oil importer – factory activity unexpectedly contracted in October, a private survey showed on Wednesday, adding to downbeat official figures from a day earlier and raising questions over its fragile economic recovery.
Oil prices on Tuesday settled lower on record production and gloomy economic data from China, as well as signs that despite the escalation of conflict in the Middle East no obvious disruption to oil supplies has so far occured.
In Gaza, a first group of injured people were evacuated to Egypt on Wednesday, a source and Egyptian media said, as Israeli forces pressed on in their battle against Hamas militants.
Iran’s Supreme Leader Ayatollah Ali Khamenei on Wednesday called on Muslim states to cease oil and food exports to Israel, demanding an end to its bombardment of the Gaza Strip, state media reported.
If there is no escalation or other threat to output from the war, said Callum Macpherson, head of commodities at Investec, “oil may struggle to sustain prices around recent highs without support from OPEC+ into 2024, making their meeting later this month crucial.”
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