Oil ticks higher ahead of OPEC+ verdict; Israel-Lebanon tensions provide support: Brent nears $93/bbl

International crude oil prices rose more than 1.5 per cent on Tuesday, December 3, ahead of the output policy decision by the Organisation of Petroleum Exporting Countries and its allies (OPEC+) meeting. Investors also weighed the fragile ceasefire between Israel and Lebanon, which provided extra support.

Global benchmark Brent crude futures last rose $1.16, or 1.6 per cent, to $72.99 per barrel, while the US West Texas Intermediate (WTI) crude was last up $1.16, or 1.7 per cent, at $69.26. Back home, crude oil futures last traded 2.94 per cent higher at ₹5,949 per barrel on the multi-commodity exchange (MCX).

Also Read: Goldman Sachs pegs Brent crude to average around $80/bbl in 2024

Oil ticks higher ahead of OPEC+ verdict

-According to news agency Reuters, OPEC+ is likely to extend its latest round of oil output cuts until the end of the first quarter. OPEC+, which accounts for about half of the world’s oil production, has been looking to gradually unwind production cuts through 2025. 

-The OPEC+ alliance is due to finalize plans at an online meeting on Thursday. However, the prospect of an oil market surplus has exerted downward pressure on prices, with Brent trading nearly six per cent below its average for December 2023.

-Goldman Sachs analysts believe that given a rise in compliance with the production cuts from Russia, Kazakhstan and Iraq, the lower Brent price level and indications in press reports, an extension of OPEC+ production cuts until April is likely expected.

-In the Middle East, holes continue to appear in the ceasefire between Israel and Hezbollah. Israel on Tuesday threatened to return to war in Lebanon if its truce with Hezbollah collapses after the deadliest day since the ceasefire was agreed last week.

Also Read: Chinese buyers soak up unsold oil as Iranian crude flows slow

-Analysts said renewed tensions in Lebanon, together with market participants pricing in a three-month extension of OPEC+ production cuts, are lifting prices. The global oil demand outlook remains weak, and China’s crude imports are likely to peak as early as next year as demand for transport fuel begins to decrease.

-Saudi Arabia, the world’s top exporter, is expected to cut crude prices for Asian buyers to their lowest in at least four years. Still, gauges of implied volatility for crude have sunk to the lowest in about two months as futures remain stuck in a range of about $6 since mid-October.

-At home, the Rajya Sabha passed a bill on Tuesday that seeks to amend the law governing the exploration and production of oil and gas and delink petroleum operations from mining operations to boost investment in the sector.

-The Oilfields (Regulation and Development) Amendment Bill, 2024, introduced in the Rajya Sabha in August this year, was passed by a voice vote. Oil Minister Hardeep Singh Puri responded to the debate on the bill, saying that the oil and gas sector involves high investment and long gestation periods.

Also Read: OPEC has little room to revive oil supply, says Iran official 

Where are oil prices headed?

Crude oil traded steadily in international markets ahead of the OPEC+ meeting and US weekly inventory data. Prices initially rose following positive Chinese factory activity data but were later offset by a rebound in the US dollar index. 

The US dollar index recovered from two-week lows, driven by concerns over France’s government debt crisis and former President Donald Trump’s threat of imposing higher tariffs on BRICS nations if they adopt an alternative currency for global trade. 

“We expect crude oil prices to remain volatile this week, influenced by fluctuations in the dollar index and developments from the OPEC+ meetings. Crude oil is supported at $67.30-$66.80, with resistance at $68.65-$69.25. In INR, crude oil has support at ₹5,725- ₹5,670, with resistance at ₹5,845- ₹5,910,” said Rahul Kalantri, VP Commodities, Mehta Equities Ltd.