Oil prices maintained a steady trajectory on Wednesday as global markets responded to a newly brokered ceasefire between Israel and Hezbollah and looked ahead to an important OPEC+ meeting scheduled for Sunday. By mid-morning, Brent crude was trading at $73.13 a barrel, marking a slight rise of 0.44%, while U.S. West Texas Intermediate crude saw a 0.48% increase, reaching $69.10. These modest gains followed a dip on Tuesday, attributed to initial responses to the ceasefire deal.
The ceasefire, facilitated by U.S. and French diplomacy, officially commenced on Wednesday, bringing a pause to tensions between Israel and the Iran-backed Hezbollah group in Lebanon. Market experts, however, remain cautious about its durability. Hiroyuki Kikukawa of NS Trading remarked on the market’s current focus, highlighting expectations that oil prices may hover in the $65-$70 range in the near term. This outlook factors in seasonal winter demand, potential increases in U.S. shale oil production, and Chinese consumption trends.
Adding to the complexities, analysts from Goldman Sachs and Morgan Stanley noted that oil remains undervalued due to a supply deficit and the potential for renewed sanctions on Iran under the incoming U.S. administration. Speculation continues over the OPEC+ group’s strategy as they deliberate a potential delay in a planned increase in production. The alliance, responsible for nearly half of the world’s oil production, has faced challenges from weaker demand and rising non-OPEC+ output, casting doubt on its earlier plan to ease production cuts gradually over the next two years. A final decision on production levels is expected during the meeting on 1 December.
Despite subdued price movement ahead of the meeting, analysts like Chris Weston of Pepperstone suggest that OPEC+ is likely to agree on deferring the planned output increase until at least the first quarter of 2025. This expectation of consensus has contributed to reduced market volatility leading up to the event.
Meanwhile, in the United States, President-elect Donald Trump has hinted at a 25% tariff on imports from Mexico and Canada, with crude oil potentially included. On the inventory front, U.S. crude oil stocks saw a significant decline of 5.94 million barrels in the week ending 22 November, far exceeding analyst predictions of a 600,000-barrel drop, while fuel inventories showed an uptick.
Oil markets remain focused on the dual impact of geopolitical developments and OPEC+ deliberations, with traders awaiting further clarity on production policies and global supply dynamics.
Challenger Energy Group plc (LON:CEG) is a Caribbean and Atlantic margin focused oil and gas company, with a range of petroleum assets located onshore in Trinidad and Tobago, and Suriname, and offshore in the waters of The Bahamas and Uruguay.
