Oil prices decline as supply risks ease amid ceasefire in Middle East
- Oil prices dropped as concerns over supply risks lessened due to a ceasefire in the Israel-Hezbollah conflict.
- Weekly data showed Brent crude fell nearly 3% and WTI lost 4.55%, amid muted trading activity during a U.S. public holiday.
- With OPEC+ delaying its policy meeting, experts expect continued production cuts, although an increase in supply is anticipated for 2025.
In recent developments, oil prices experienced notable fluctuations amid geopolitical tensions. On Friday, November 29, 2024, Brent crude futures declined by 0.46%, closing at $72.94 a barrel, while West Texas Intermediate crude saw a sharper drop of 1.05%, settling at $68. These changes reflect a weekly decline of nearly 3% for Brent and a loss of 4.55% for WTI. The decreased prices are primarily attributed to reduced concerns over supply risks related to the ongoing conflict between Israel and Hezbollah. Although both parties accused each other of ceasefire violations, the ceasefire, which came into effect earlier in the week, has effectively lowered the risk premium associated with oil prices. Furthermore, no disruptions in oil supply have been reported due to the Middle East conflict, providing additional pressure on prices. Another significant factor influencing market dynamics is the anticipated increase in oil supply for the upcoming year. The International Energy Agency has projected that there could be an excess supply of more than one million barrels per day, accounting for over 1% of global output. Experts suggest that these projections indicate a looser oil market for 2025, in contrast to the current tighter conditions. Market analyst Tamas Varga from the oil broker PVM stated that oil prices are likely to average below the levels anticipated for 2024. This outlook has further contributed to the downward pressure on prices throughout the week. Compounding these factors, the OPEC+ group, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, has deferred its next policy meeting from December 1 to December 5. This delay raises questions about possible decisions regarding the extension of production cuts. It suggests that the market's reaction might hinge on the outcomes of this upcoming meeting, with expectations of continued supply management in the face of flags indicating a critical assessment of global demand and supply dynamics going into 2025. Overall, the combination of eased geopolitical tensions and projected supply increases outlines the current landscape for oil prices, leading to significant declines in the market. With all these factors considered, the oil market's response illustrates the interconnectedness of geopolitical realities and economic forecasts, where supply prospects significantly influence pricing trends. Observations from international agencies and market experts will continue to shape expectations as the year progresses.