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Brent crude fell 49 cents, or 0.56%, to $87.16 a barrel by 1002
GMT. U.S. West Texas Intermediate (WTI) crude fell by 55 cents,
or 0.64%, to $85.42.
Brent and WTI had surged more than $3.50 on Monday on concern
the military clashes between Israel and Palestinian Islamist
group Hamas could escalate into a broader conflict, but settled
slightly lower in Tuesday's session.
"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.
But Swiss 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.
Israel produces very little crude oil and has a refinery
capacity of around 297,000 barrels per day, but markets are
worried that the conflict could broaden and disrupt wider Middle
East supply, worsening an expected deficit for the rest of the
year.
Saudi Arabia said on Tuesday it is working with regional and
international partners to prevent the escalation of the
situation in Gaza and neighbouring areas, and reaffirmed it
supports efforts to stabilise oil markets.
Russia and Saudi Arabia met in Moscow on Wednesday, where the
oil market and OPEC+ collaboration were discussed.
Kremlin spokesman Dmitry Peskov said on Wednesday it is
difficult to overestimate Russia's coordination with Saudi
Arabia and other partners on the oil market.
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 policy
decisions.
Several Fed officials in recent days have suggested that the
U.S. central bank doesn't need to raise borrowing costs any
further.
U.S. Treasury Secretary Janet Yellen said on Wednesday that she
still expects the U.S. economy to experience a soft landing,
despite "additional concerns" brought about by the situation in
Israel.
(Reporting by Robert Harvey, Laura Sanicola and Muyu Xu; Editing
by Sharon Singleton)
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