Shaky Lebanon Ceasefire, OPEC+ Supply Cuts Extension Plans Buoy Oil Prices

Oil prices rose more than 2 per cent on Tuesday as Israel threatened to attack Lebanon if the ceasefire deal with Hezbollah collapses while the market awaits expectations of an extension of supply cuts by the Organisation of the Petroleum Exporting Countries and its allies, OPEC+

Brent crude rose by $1.79, or 2.5 percent to settle at $73.62 a barrel while the US West Texas Intermediate (WTI) crude gained $1.84, or 2.7 percent to close at $69.94 per barrel.

Israel continued strikes against Hezbollah fighters ignoring last week’s truce agreement in Lebanon while top Lebanese officials have urged the US and France to press Israel to uphold the ceasefire.

Market analysts noted that the risk to the ceasefire has some oil traders worrying more about tensions in the Middle East.

Although the Lebanon conflict has not resulted in oil supply disruptions, traders have been tracking tensions between Iran and Israel in the past few months.

OPEC+ is likely to extend its latest round of oil output cuts until the end of the first quarter at the meeting scheduled for Thursday (December 5).

OPEC+ pumps about half the world’s oil and aims to unwind output cuts through 2025. However, a slowdown in global demand and rising output outside the group pose hurdles to that plan and have weighed on prices.

OPEC+ members are holding back 5.86 million barrels per day of output, or about 5.7 per cent of global demand, in a series of steps agreed since 2022 to support the market.

An output hike of 180,000 barrels per day was planned for January from the eight members involved in OPEC+’s most recent cuts of 2.2 million barrels per day. The hike has been delayed from October due to falling prices.

The global oil demand outlook remains weak and China’s crude imports are likely to peak as early as next year as demand for transport fuel begins to decrease.

Crude oil inventories in the US rose by 1.232 million barrels for the week ending November 22, according to The American Petroleum Institute (API). For the week prior, the API reported a 4.753 barrel build in crude inventories.

So far this year, crude oil inventories have fallen by just over 4 million barrels since the beginning of the year, according to API data.

Official data from the Energy Information Agency (EIA) will be released later on Wednesday.