Oil prices steady as markets eye Israel-Hezbollah ceasefire, OPEC+ decisions
Onome Amuge
Oil prices hovered at stable levels on Wednesday as the markets weighed in on Israel and Hezbollah’s ceasefire agreement and shifted their focus to OPEC+’s upcoming gathering. OPEC+, the leading oil-producing cartel, is set to meet on Sunday to discuss the potential deferment of their planned oil output boost.
Brent crude futures inched up 38 cents, a 0.52 percent increase, to $73.19 a barrel, with the U.S. West Texas Intermediate (WTI) crude futures following suit, gaining 39 cents, or 0.57 percent, to $69.16.
The ascent in oil prices comes as markets digested the impact of Israel and Lebanon’s Hezbollah’s ceasefire deal, which somewhat soothed tensions in the Middle East, a major oil-producing region.
The oil market reacted cautiously to the recent ceasefire agreement struck between Israel and Hezbollah, a militant group backed by Iran. On Wednesday, the truce took effect after both parties accepted the terms mediated by the United States and France.
Hiroyuki Kikukawa, president of NS Trading, which belongs to the Nissan Securities Group, shared his insights on the situation, noting that market participants are closely monitoring the implementation of the ceasefire.
Goldman Sachs and Morgan Stanley, two prominent financial institutions, have expressed their conviction that oil prices are currently undervalued. Their commodities research heads have pointed to a probable market deficit, further exacerbated by the possibility of new U.S. sanctions on Iranian oil under President-elect Trump.
On the production front, sources within the OPEC+ alliance have hinted at a potential delay to the group’s planned oil output increase, initially slated for January.
OPEC+, the oil production alliance accounting for nearly half of the world’s oil, had aimed to gradually phase out its production cuts through 2024 and 2025. However, tepid global demand for oil and rising production from non-OPEC+ countries have cast a shadow on these plans, raising concerns about their feasibility.
Amidst the looming OPEC+ decision, the muted market reaction and lack of pronounced price movements have suggested to analysts that oil traders are not expecting significant volatility in the lead-up to the meeting.
According to Chris Weston, the head of research at Pepperstone, traders appear to be anticipating a low-drama OPEC+ meeting, with the cartel likely to adopt a nearly unanimous stance to delay the unwinding of its 2.2 million barrels per day production cuts until Q1 2025.