NEW YORK: Oil prices rose more than 1.5% on Tuesday as investors await an OPEC+ meeting expected to rubber stamp continued output cuts while a fragile ceasefire between Israel and Lebanon provided additional support. Brent crude futures rose $1.16, or 1.6%, to $72.99 a barrel by 1346 GMT while US West Texas Intermediate crude was up $1.16, or 1.7%, at $69.26.
OPEC+ is likely to extend its latest round of oil output cuts until the end of the first quarter when it meets on Thursday, four OPEC+ sources told Reuters. OPEC+, which accounts for about half of the world’s oil production, has been looking to perform a gradual unwinding of production cuts through 2025.
However, the prospect of an oil market surplus has exerted downward pressure on prices, with Brent trading nearly 6% below its average for December 2023. “Given a rise in compliance with production cuts from Russia, Kazakhstan and Iraq, the lower Brent price level and indications in press reports, we assume an extension of OPEC+ production cuts til April,” Goldman Sachs analysts said in a note.
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.
“Renewed tensions in Lebanon, together with market participants pricing in a three-month extension of OPEC+ production cuts, is lifting prices,” said UBS analyst Giovanni Staunovo.
The global oil demand outlook, meanwhile, remains weak and China’s crude imports are likely to peak as early as next year as demand for transport fuel begins to decrease, researchers and analysts said.
Saudi Arabia, the world’s top exporter, is expected to cut crude prices for Asian buyers to their lowest in at least four years, traders said on Monday.
