Oil prices were supported by signs that the OPEC+ alliance will again delay some production increases, offsetting a decline in geopolitical risks following a ceasefire agreement between Israel and Hezbollah in Lebanon.
West Texas Intermediate crude traded below $69 a barrel, little changed from Tuesday’s close, after losing more than 3% in the previous two sessions on ceasefire expectations, while Brent crude closed near $73. OPEC+ is expected to delay a planned January production increase by several months at its meeting this week, due to signs of a surplus in the market, according to delegates.
Israel reached a 60-day ceasefire with Lebanon’s Hezbollah group after weeks of U.S.-brokered negotiations. However, shortly after President Joe Biden announced the deal, attacks from both sides continued, highlighting the difficulties of securing a long-term agreement.
Oil has been trading in a tight range, with the spread between bid and ask prices narrowing, since the beginning of last month, affected by bullish and bearish signals. There were a number of factors that could affect the market’s movement, including Trump’s policies in his second term, and geopolitical risks related to Russian and Iranian supplies in the coming year.
Robert Rennie, head of commodity and carbon research at Westpac Bank, said:
“We are in a reasonable pricing phase with Brent crude trading between $70 and $75 per barrel,” he added. “It is pretty certain that OPEC+ will agree to extend the current production cuts into the first quarter.”
The American Petroleum Institute reported that U.S. oil inventories fell by 5.9 million barrels last week, the largest decline since August if confirmed by government figures due on Wednesday.
