Oil inches higher as traders eye possible Middle East ceasefire
A ceasefire in Lebanon will reduce the chance that Trump administration will impose stringent sanctions on Iranian crude oil, ANZ analysts say
26 November 2024 - 08:01
byGeorgina McCartney and Gabrielle Ng
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Houston/Singapore — Oil prices ticked up in early trade on Tuesday after falling in the previous session as investors took stock of a potential ceasefire between Israel and Hezbollah, weighing on oil’s risk premium.
Brent crude futures rose 29c, or 0.4%, to $73.2 a barrel by 4.30am GMT, while US West Texas Intermediate (WTI) crude futures were at $69.2 a barrel, up 26c, or 0.38%.
Both benchmarks settled down $2 a barrel on Monday following reports that Lebanon and Israel had agreed to the terms of a deal to end the Israel-Hezbollah conflict, which triggered a crude oil sell-off.
Market reaction to the ceasefire news was “over the top”, said senior market analyst Priyanka Sachdeva at Phillip Nova.
While the news calmed fear of disruption to Middle Eastern supply, the Israel-Hamas conflict “never actually disrupted supplies significantly to induce war premiums” this year, Sachdeva said.
“The vulnerability of oil prices to geopolitical headlines lacks foundational backup and, coupled with the inability to maintain recent gains, reflects weakening global demand for oil and suggests a volatile market ahead.”
Iran, which supports Hezbollah, is an Opec member with production of about 3.2-million barrels a day, or 3% of global output.
A ceasefire in Lebanon would reduce the likelihood that the incoming US administration would impose stringent sanctions on Iranian crude oil, said ANZ analysts.
If president-elect Donald Trump’s administration returned to a maximum-pressure campaign on Tehran, Iranian exports could shrink by 1-million barrels a day, analysts have said, tightening global crude flows.
In Europe, Ukraine’s capital Kyiv was under a sustained Russian drone attack on Tuesday, Mayor Vitali Klitschko said.
Hostilities between major oil producer Russia and Ukraine intensified this month after US President Joe Biden allowed Ukraine to use US-made weapons to strike deep into Russia in a significant reversal of Washington’s policy in the Ukraine-Russia conflict.
Elsewhere, Opec+ could consider leaving its current oil output cuts in place from January 1 at its next meeting on Sunday, Azerbaijan’s energy minister, Parviz Shahbazov, told Reuters, as the producer group had already postponed hikes amid demand worries.
On Monday, Trump said he would sign an executive order imposing a 25% tariff on all products coming into the US from Mexico and Canada. It was unclear whether this would include crude oil.
Most of Canada’s 4-million barrels a day of crude exports go to the US. Analysts have said it is unlikely Trump will impose tariffs on Canadian oil, which cannot be easily replaced since it differs from grades that the US produces.
“Trump’s policies are just a blueprint for now.... What actually happens on that front is still uncertain,” said Sachdeva.
For the time being, markets were eyeing Trump’s plan to increase US oil production, which had been near record levels since the beginning of 2022 and absorbed supply disruption from geopolitical crises and sanctions, Sachdeva said.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Oil inches higher as traders eye possible Middle East ceasefire
A ceasefire in Lebanon will reduce the chance that Trump administration will impose stringent sanctions on Iranian crude oil, ANZ analysts say
Houston/Singapore — Oil prices ticked up in early trade on Tuesday after falling in the previous session as investors took stock of a potential ceasefire between Israel and Hezbollah, weighing on oil’s risk premium.
Brent crude futures rose 29c, or 0.4%, to $73.2 a barrel by 4.30am GMT, while US West Texas Intermediate (WTI) crude futures were at $69.2 a barrel, up 26c, or 0.38%.
Both benchmarks settled down $2 a barrel on Monday following reports that Lebanon and Israel had agreed to the terms of a deal to end the Israel-Hezbollah conflict, which triggered a crude oil sell-off.
Market reaction to the ceasefire news was “over the top”, said senior market analyst Priyanka Sachdeva at Phillip Nova.
While the news calmed fear of disruption to Middle Eastern supply, the Israel-Hamas conflict “never actually disrupted supplies significantly to induce war premiums” this year, Sachdeva said.
“The vulnerability of oil prices to geopolitical headlines lacks foundational backup and, coupled with the inability to maintain recent gains, reflects weakening global demand for oil and suggests a volatile market ahead.”
Iran, which supports Hezbollah, is an Opec member with production of about 3.2-million barrels a day, or 3% of global output.
A ceasefire in Lebanon would reduce the likelihood that the incoming US administration would impose stringent sanctions on Iranian crude oil, said ANZ analysts.
If president-elect Donald Trump’s administration returned to a maximum-pressure campaign on Tehran, Iranian exports could shrink by 1-million barrels a day, analysts have said, tightening global crude flows.
In Europe, Ukraine’s capital Kyiv was under a sustained Russian drone attack on Tuesday, Mayor Vitali Klitschko said.
Hostilities between major oil producer Russia and Ukraine intensified this month after US President Joe Biden allowed Ukraine to use US-made weapons to strike deep into Russia in a significant reversal of Washington’s policy in the Ukraine-Russia conflict.
Elsewhere, Opec+ could consider leaving its current oil output cuts in place from January 1 at its next meeting on Sunday, Azerbaijan’s energy minister, Parviz Shahbazov, told Reuters, as the producer group had already postponed hikes amid demand worries.
On Monday, Trump said he would sign an executive order imposing a 25% tariff on all products coming into the US from Mexico and Canada. It was unclear whether this would include crude oil.
Most of Canada’s 4-million barrels a day of crude exports go to the US. Analysts have said it is unlikely Trump will impose tariffs on Canadian oil, which cannot be easily replaced since it differs from grades that the US produces.
“Trump’s policies are just a blueprint for now.... What actually happens on that front is still uncertain,” said Sachdeva.
For the time being, markets were eyeing Trump’s plan to increase US oil production, which had been near record levels since the beginning of 2022 and absorbed supply disruption from geopolitical crises and sanctions, Sachdeva said.
Reuters
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