Oil Prices Edge Up Amid Tensions and OPEC+ Delay
Oil prices saw a modest increase on Friday, buoyed by rising supply risks due to escalating tensions between Israel and Hezbollah, as well as uncertainty surrounding OPEC+ policies. Brent crude futures climbed by 10 cents, or 0.1%, to $73.38 a barrel by 0516 GMT. U.S. West Texas Intermediate (WTI) crude was up by 45 cents, or 0.7%, settling at $69.17 per barrel compared to Wednesday’s closing price.
However, despite the uptick, oil prices experienced a decline over the week. Brent futures were down by 2.4%, and WTI benchmark crude saw a 2.9% drop. Thin trading volumes were a factor, with U.S. financial markets closed for the Thanksgiving holiday on Thursday.
Tensions in the Middle East Stir Supply Fears
The market’s slight rally came as Israel and Hezbollah exchanged accusations of violating a ceasefire agreement. While the deal had initially brought relief, alleviating fears of broader conflict disrupting oil supplies from the Middle East, the latest escalation raised concerns about renewed risks. The volatile region, home to key oil-producing nations, remains a significant source of risk premium in global oil prices.
Despite these tensions, oil supplies from the Middle East have largely remained unaffected. Both Israel’s conflicts with Hezbollah in Lebanon and Hamas in Gaza have yet to significantly disrupt oil flows. This has been reassuring for investors, even as the situation remains fragile.
OPEC+ Delays Key Meeting, Likely Extending Cuts
Adding to the market uncertainty, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, postponed their next policy meeting. Originally scheduled for December 1, the meeting will now take place on December 5, primarily to avoid a scheduling conflict.
OPEC+ is expected to announce an extension of its existing production cuts during the December meeting. However, analysts are skeptical that these measures will be enough to balance the market, especially considering forecasts of a production surplus in the coming year.
BMI, a subsidiary of Fitch Solutions, downgraded its price forecast for Brent crude to $76 per barrel in 2025, down from $78 previously. Analysts cited ongoing weakness in the oil market and a “bearish” outlook for the sector as reasons for the downgrade.
“OPEC+ will likely extend the cuts into the new year, but this will not be enough to eliminate the production glut we anticipate,” said BMI analysts.
Geopolitical Tensions Fuel Supply Risks
The geopolitical situation also remained precarious this week, with Russia continuing to target Ukrainian energy infrastructure. This is the second such attack this month, and analysts fear it could lead to retaliation, further destabilizing the oil market and potentially impacting Russian oil exports.
Adding to the mix, Iran’s nuclear activities raised alarm bells on the global stage. The country informed the U.N. nuclear watchdog that it plans to install over 6,000 additional uranium-enriching centrifuges. This move raised concerns about the potential for tighter sanctions on Iran, which could further reduce its crude oil exports.
Goldman Sachs analysts have warned that if Western powers tighten sanctions enforcement on Iran’s crude oil output, Iranian oil exports could fall by up to 1 million barrels per day in the first half of next year.
The Road Ahead for Oil Prices
With supply risks from the Middle East and OPEC+ uncertainties, oil prices are likely to remain volatile in the near term. Investors will be keeping a close watch on the December OPEC+ meeting, as any further production cuts or policy shifts could have significant implications for global oil prices.
Despite the weekly losses, the slight uptick on Friday signals that the oil market remains sensitive to global risks and uncertainties.