Oil prices rise on geopolitical tensions, OPEC+ supply plans
Oil prices rose on Wednesday as market participants weighed geopolitical tensions and the prospect of OPEC+ extending supply cuts amid weak demand.
Brent crude futures rose 16 cents, or 0.2%, to $73.78 a barrel by 0440 GMT, while U.S. West Texas Intermediate crude rose 14 cents, or 0.2%, to $70.08.
On Tuesday, Brent posted its biggest gain in two weeks, rising 2.5%.
A shaky ceasefire between Israel and Hezbollah, a limited declaration of martial law by South Korea and a rebel offensive in Syria that threatens to draw troops from some oil-producing countries are all providing support for oil prices, said Priyanka Sachdeva, senior market analyst at Phillip Nova.
However, the oil market is largely discounted and oversupplied in 2025 amid weak demand signals from the U.S. and China, the world’s top two economies, he added.
“Weaker demand signals from mainland China are raising concerns about demand in the oil market… The world’s largest crude importer may struggle to maintain its significant share of global demand in 2025.”
Meanwhile in the U.S., crude inventories rose by 1.2 million barrels last week, market sources said, citing data from the American Petroleum Institute. [API/S]
Gasoline inventories also rose, by 4.6 million barrels, although the week included Thanksgiving when demand typically spikes as families travel by car for holiday gatherings.
Official data on oil stocks from the U.S. Energy Information Administration is due on Wednesday at 10:30 a.m. ET (1530 GMT). Analysts polled by Reuters had forecast a crude draw of 700,000 barrels and a gasoline build of 639,000 barrels.
Also supporting prices, the Organization of the Petroleum Exporting Countries and its allies, or OPEC+, is likely to extend production cuts until the end of the first quarter of next year when members meet on Thursday, industry sources told Reuters. OPEC+ has been seeking to gradually phase out supply cuts through next year.
"A key problem facing any OPEC+ rollback is that non-OPEC supply growth by 2025 is expected to outpace global oil demand growth," Commonwealth Bank of Australia (OTC:CMWAY) analyst Vivek Dhar said in a note.
"The International Energy Agency estimates that non-OPEC supply growth, led by the U.S., Canada, Guyana and Brazil, will increase supply by 1.5 million barrels per day (bpd) next year. Global oil demand is only expected to increase by about 1 million bpd as Chinese oil demand is expected to remain low."
In the Middle East, Israel said on Tuesday it would return to war with Hezbollah if its ceasefire fails, and its attacks would extend further into Lebanon and target the country itself. The comments followed the deadliest day since Israel and Hezbollah agreed to a ceasefire last week.
In neighboring Syria, rebels advancing against government forces approached the major city of Hama on Tuesday, rebels and war monitors said, after they took Aleppo by surprise last week.
Source: Investing.com
