Prices of oil rose Friday on renewed supply concerns after Israel and Hezbollah exchanged accusations over ceasefire violations.
The price of West Texas Intermediate crude was $69.28 a barrel at the time this article was written, an increase of 0.8% over the previous close.
Brent crude at the Intercontinental Exchange is $72.99 per barrel, an increase of 0.3%.
Israel and Hezbollah, a group based in Lebanon, reached a ceasefire agreement on Wednesday. The deal was mediated by US president Joe Biden.
The agreement was designed to allow both Israelis and Lebanese to return home to the border areas, which had been ravaged by fighting for 14 months.
According to a Reuters article, Israel’s army said that the ceasefire had been violated by suspected suspects who arrived in vehicles at various locations in southern zone.
More than half of all the world’s reserves of oil are located in the Middle East. The escalating tensions in the Middle East could have an impact on oil supply, which would increase prices.
Since the conflict between Israel & Hamas erupted last year, the supply from the region has not been affected so far.
Geopolitics is the focus
On Thursday, Russia struck again at Ukrainian energy installations.
Retaliation from Ukraine could impact Russian oil supplies. Russia is still one of the largest oil exporters, despite western sanctions.
Reuters reported that Iran informed a United Nations nuclear monitor that it planned to install over 6,000 more uranium enrichment centrifuges in its enrichment facilities.
Goldman Sachs analysts have estimated that Iranian crude oil production could fall by 1,000,000 barrels per day if the US or other western powers tighten sanctions enforcement next year.
Donald Trump, the US president-elect, is expected to tighten sanctions against Iran’s oil exports.
Under Biden’s administration, the US did not enforce its laws more strictly, resulting in a surge in Iranian oil imports.
China is the main buyer of Iran’s crude oil exports. Vortexa reports that oil exports from Iran to China are up 30% year-on year in the first 10 month of this year.
OPEC+ Postpones Meeting
After the Organization of the Petroleum Exporting Countries (OPEC) and its allies moved the Sunday meeting of their group to December 5, the oil market is in a state of uncertainty.
In an official statement, OPEC announced that the meeting had been rescheduled because several ministers would be attending the Gulf Summit 45th in Kuwait City.
OPEC announced that the meeting would be conducted via videoconference.
Arslan Ali is a derivatives analyst for FXempire.com. He said:
The market sentiment was further tainted by OPEC+’s decision to delay its important policy meeting until December 5, making investors uncertain about future production strategies.
US attributed for thin trading volumes.
The Thanksgiving holiday has heightened a cautious tone in the market.
The cartel is expected to make a decision about its oil production policy in January, as the voluntary cuts of up to 2.2 million barrels a day will expire by the end of the month.
OPEC had planned to increase its output by 180,000 barrels a day in December and undo some of the voluntary production cuts.
They extended the cuts until December 31st due to lower oil prices, and their concern over an oversupply.
Parviz Shahbazov, the Azerbaijani Energy Minister, confirmed this. He said that “OPEC+ may or may not discuss oil production rollover during its next meeting.” It’s difficult to make a pre-judgment”
Brent crude forecast
Brent crude oil is supported at $70 a barrel. A long-term resistance was at $80 per barrel.
In a note, Christopher Lewis, an analyst at FXempire said: “That’s just assuming we get anywhere close to there.”
I think it will be hard to go above $75. At this time, I believe that is your first real obstacle,” he said.
This market is for short-term traders who like to trade range-bound markets.
The markets are not moving much at all, but the support for crude oil in both grades Brent and WTI dates back several years.
This post Oil Prices Rise on New Supply Tensions; Brent May Struggle to Break $75/Barrel may be updated as new developments unfold
