Oil trades higher on Israel-Lebanon conflict: Brent, US WTI hit two-week high ahead of OPEC+ verdict
- Brent crude futures last rose 38 cents, or 0.5 per cent, to $74.00 a barrel after rising 2.5 per cent in the previous session, while US West Texas Intermediate crude futures were up 32 cents, also 0.5 per cent, to $70.26.
International crude oil prices rose slightly on Wednesday, December 4, even as traders expected the Organisation of Petroleum Exporting Countries and its allies (OPEC+) to announce an extension to supply cuts this week while heightened geopolitical tensions continued to dominate market sentiment.
Brent crude futures last rose 38 cents, or 0.5 per cent, to $74.00 a barrel, while US West Texas Intermediate crude futures were up 32 cents, also 0.5 per cent, to $70.26. On Tuesday, Brent posted its biggest gain in two weeks, rising by 2.5 per cent. Back home, crude oil futures last traded 1.52 per cent lower at ₹5,839 per barrel on the multi-commodity exchange (MCX).
Brent, US WTI hit 2-week high: What's driving crude oil prices?
-Priyanka Sachdeva, senior market analyst at Phillip Nova, told news agency Reuters that a shaky ceasefire between Israel and Hezbollah, South Korea's curtailed declaration of martial law, and a rebel offensive in Syria that threatens to draw in forces from several oil-producing countries, lent support to oil prices.
-In the Middle East, Israel said on Tuesday, December 3, that it would return to war with Hezbollah if their truce collapses and that its attacks would go deeper into Lebanon and target the state itself. This shored up crude oil prices.
-In South Korea, lawmakers have submitted a bill to impeach President Yoon Suk Yeol after he declared martial law in the nation on Tuesday, which was reversed within hours, sparking a political crisis in Asia's fourth-largest economy.
-However, analysts say the bullish momentum hasn't pushed crude past the $75 resistance, indicating market sensitivity to geopolitical and economic developments may be waning. With OPEC+ widely expected to extend its 2.2 million barrels per day voluntary production cut into the first quarter of 2025, prices will likely stay range-bound unless a new catalyst emerges.
-Analysts said the market was on tenterhooks, with investors focused on the upcoming OPEC+ meeting. OPEC+ is likely to extend output cuts until the end of the first quarter of next year when members meet on Thursday. OPEC+ has been looking to phase out supply cuts through next year.
Where are prices headed?
Analysts said crude oil prices surged by over two per cent in international markets, driven by the potential extension of supply cuts by the OPEC+ nations amid a weakened global oil demand.
US WTI crude futures tested their 50-day moving average, a key level that had spurred technical buying. Oil was bolstered by fresh conflict between Israel and Lebanon, as Hezbollah fighters continue to disregard the ceasefire agreement, raising the possibility of further Israeli strikes on Lebanon.
"We anticipate crude oil prices remaining volatile this week due to fluctuations in the dollar index, upcoming OPEC+ meetings, and ongoing geopolitical tensions. Crude oil has support at $69.20-$68.55 and resistance at $70.65-$71.25. In INR, crude oil finds support at ₹5,855-5,790, with resistance at ₹5,990-6,040," said Rahul Kalantri, VP of Commodities, Mehta Equities Ltd.
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