Oil Prices Stable as Israel-Hezbollah Ceasefire Takes Effect
Crude oil prices remained stable today as a ceasefire between Israel and Hezbollah took effect, suggesting the end of violence in the oil region could be in sight.
Separately, expectations that OPEC+ will extend its production cuts on Sunday helped keep the benchmarks steady.
Brent crude was trading at $72.88 per barrel at the time of writing, with West Texas Intermediate at $68.80 per barrel, both slightly up from opening in Asia, after booking a dip on Tuesday, following the announcement of the Israel-Hezbollah ceasefire. However, Israeli strikes on Lebanon shortly after that announcement raised some doubts about the longevity of the deal.
“Market participants are assessing whether the ceasefire will be observed,” Hiroyuki Kikukawa, head of Nissan Securities’ NS Trading, told Reuters. “We expect WTI to trade within the range of $65-$70 a barrel, factoring in weather conditions during the Northern Hemisphere’s winter, a potential increase in shale oil and gas production under the incoming Donald Trump administration in the U.S., and demand trends in China,” the analyst added.
Goldman Sachs, meanwhile, said another extension of OPEC+’s production cuts at the Sunday meeting of the group would provide support for oil prices over the short term. “Any ramp-up in OPEC+ production will be gradual and data-driven,” the bank said, as quoted by Reuters, echoing OPEC+’s own repeated reminders that it would only roll back the cuts if market conditions—that is, prices—are right.
Commodity trading majors Vitol, Trafigura, and Gunvor also do not expect more oil coming from OPEC+ after the Sunday meeting, per Reuters. This is keeping prices largely unchanged although it does not seem to be having any marked positive effect on them.
What could have a positive effect on prices is the EIA’s inventory report, out later today. The American Petroleum Institute yesterday reported a crude oil inventory drop of almost 6 million barrels for the week to November 22. This was the largest inventory draw since August and if confirmed by the EIA, it would provide a boost for prices.