Middle East Tensions Send Oil Prices Soaring
The global oil market is on high alert as tensions between Israel and Lebanon escalate, pushing oil prices up by over 2% on Tuesday. The threat of a collapsed truce between Israel and Hezbollah has sparked concerns about potential supply disruptions, sending Brent crude futures soaring by $1.79 to $73.62 a barrel, its biggest gain in two weeks.
Israel’s Strikes on Hezbollah Ignite Fears
Israeli forces have continued to strike against what they claim are Hezbollah fighters ignoring last week’s truce agreement in Lebanon. Top Lebanese officials are urging Washington and Paris to pressure Israel to uphold the ceasefire, as the risk to the fragile truce grows. UBS analyst Giovanni Staunovo notes that while the Lebanon conflict has not yet resulted in oil supply disruptions, traders are increasingly worried about tensions between Iran and Israel over the coming months.
OPEC+ Meeting Looms Large
Meanwhile, the Organization of the Petroleum Exporting Countries and its allies are set to meet on Thursday, where they are likely to extend output cuts until the end of the first quarter next year. This move is expected to limit the market surplus and provide a softer landing for the oil market than most forecasts predicted. Scott Shelton, energy analyst at TP ICAP, believes that an extension of OPEC+ supply cuts will support oil prices.
Global Demand Outlook Remains Weak
Despite the upward pressure on oil prices, the global demand outlook remains weak. China’s crude imports are likely to peak as early as next year as demand for transport fuel begins to decrease, according to researchers and analysts. U.S. crude oil inventories rose 1.2 million barrels in the week ended November 29, indicating weak demand.
Expert Insights
Francisco Blanch, head of global commodities at BofA Securities, predicts that oil prices will roll back slightly in 2025 as demand growth rates slow. “Oil is not going to be in short supply next year,” he said. Analysts polled by Reuters expect a 700,000-barrel decline in crude stocks, but rising inventories suggest otherwise.
What’s Next for Oil Prices?
As tensions in the Middle East continue to simmer, oil traders will be keeping a close eye on developments. With OPEC+ set to meet on Thursday, the extension of supply cuts could provide a much-needed boost to oil prices. However, the weak global demand outlook and rising inventories suggest that oil prices may not continue to rise indefinitely.
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