Onome Amuge
Oil prices gained ground on Wednesday as market players considered the interplay between geopolitical uncertainty and the possibility of prolonged production curbs by OPEC+ members, amid waning demand.
Brent crude futures rose 0.3 percent or 23 cents to $73.85 a barrel, while West Texas Intermediate futures gained a similar 0.3 percent or 19 cents to reach $70.13 by Wednesday morning.Â
This upward trend comes a day after Brent prices experienced their biggest jump in two weeks, surging 2.5 percent.
Oil markets found support from a range of geopolitical developments, including the fragile truce between Israel and Hezbollah, South Korea’s curtailed state of emergency, and a rebel offensive in Syria that poses the risk of drawing oil-producing nations into conflict, explained Priyanka Sachdeva, senior market analyst at Phillip Nova.
Sachdeva added that the projected oversupply of oil in 2025 and the lackluster demand signals emanating from the world’s largest economies, the United States and China, have forced oil prices to trade at a discount.
On the U.S. domestic front, crude oil inventories swelled by 1.2 million barrels last week, reported market sources who cited data from the American Petroleum Institute.
Inventories followed a similar upward trajectory, climbing by 4.6 million barrels despite the Thanksgiving holiday, which typically witnesses a surge in gasoline demand due to increased car travel for family gatherings.
In a development that buttressed oil prices, industry insiders revealed to Reuters that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) are likely to prolong their production cuts until the end of the first quarter of the coming year.
The cartel is expected to discuss the extension at their meeting on Thursday, with the aim of gradually phasing out the supply curbs through 2023.
Meanwhile, geopolitical tensions heightened in the Middle East, as Israel warned on Tuesday that it would return to the battlefield if the fragile ceasefire with Hezbollah were to unravel.Â
Israeli officials declared that future attacks would not only be directed at the militant group but also at the state of Lebanon. This posturing follows a significant escalation in violence last week, the deadliest since the ceasefire was brokered.
Also, in Syria, rebels pressed on with their offensive against government forces, edging closer to the crucial city of Hama, as reported by rebels and a prominent conflict monitoring group. This follows the shock capture of Aleppo by the rebels last week.
