Oil prices increased by nearly 1% on Thursday after Israel reported ceasefire breaches by Hezbollah, reigniting fears of instability in the Middle East.
The Israeli military stated on X that “several suspects, some in vehicles, breached the agreement in southern Lebanon,” highlighting the fragile nature of the truce. The ceasefire, intended to end 14 months of border conflict, now faces uncertainty, fueling concerns over oil supply.
Brent crude recovered to $72.90 a barrel during midday trading in Europe, reversing earlier losses. European stocks trimmed gains, and the euro fell 0.2% in response to the news.
Residents near the Israel-Lebanon border remain advised against returning, with safety concerns mounting as tensions escalate.
OPEC+ Postpones Meeting Amid Stronger Cartel Cohesion
The OPEC+ alliance delayed its crucial policy meeting from December 1 to December 5, as key ministers prepare for the 45th Gulf Summit in Kuwait. Analysts expect the meeting to address production cuts and possible extensions into 2024.
Goldman Sachs analysts, led by Daan Struyven, anticipate a cautious and data-driven approach by OPEC+. Rising compliance with production cuts signals stronger cartel unity, which may lead to extended caps.
Struyven noted, “The rise in compliance strengthens Saudi Arabia’s modestly positive revenue incentives to extend cuts.” The bank forecasts gradual production increases starting in April 2025, with Brent crude averaging $76 a barrel that year and peaking at $78 by June.
Market Dynamics and Future Demand Outlook
US crude and gasoline inventories remain at five-year lows, amplifying short-term supply concerns. Goldman Sachs predicts Brent could hit the mid-$80s in early 2025 if stricter sanctions cut Iran’s output by 1 million barrels daily.
Despite global decarbonization efforts, oil demand is projected to grow for another decade, driven by emerging markets and slow transitions in air travel and petrochemicals.
Investors are closely monitoring developments in the Middle East and OPEC+ decisions, which will shape oil markets heading into 2025.
