Oil Prices Edge Higher Amid OPEC+ Supply Cuts and Geopolitical Tensions

Oil prices firmed slightly on Wednesday as traders anticipated OPEC+ to extend voluntary production cuts, while ongoing geopolitical tensions provided additional support to the market.

Market Performance

• Brent Crude Futures: Up 19 cents (0.26%) at $73.81 per barrel (0916 GMT).
• West Texas Intermediate (WTI) Crude: Gained 13 cents (0.19%) to $70.07 per barrel.

Tuesday saw Brent crude post its largest gain in two weeks, rising 2.5%, fueled by heightened geopolitical risks.

Geopolitical Risks Underpin Prices
Persistent conflicts in the Middle East and political unrest in Asia have lent support to crude prices:

• Middle East: Israel warned of renewed military action against Hezbollah if the shaky ceasefire collapses, with potential deeper incursions into Lebanon.
• South Korea: Political turmoil escalated after President Yoon Suk Yeol’s martial law declaration was swiftly reversed, prompting lawmakers to push for impeachment.
• Syria: Rebel offensives threaten to entangle oil-producing nations, adding to geopolitical risks.

Priyanka Sachdeva of Phillip Nova highlighted these factors as critical in maintaining bullish momentum for crude prices.

OPEC+ and Supply Cuts
OPEC+ is expected to announce an extension of its 2.2 million barrels per day (bpd) voluntary production cut into Q1 2025 during its meeting on Thursday. Industry sources indicated that while the group aims to phase out supply cuts next year, current measures are likely to persist to stabilize prices.

Dilin Wu of Pepperstone noted that despite the positive sentiment, prices remain capped below $75, reflecting market caution and sensitivity to geopolitical developments.

Tamas Varga of PVM suggested that while OPEC+ actions and geopolitical risks may influence prices temporarily, the fundamental outlook of loose oil balances and sufficient supply will constrain attempts to push prices toward $80 per barrel.

U.S. Inventory Dynamics
Data from the American Petroleum Institute (API) revealed:

• Crude Oil Inventories: Increased by 1.2 million barrels last week.
• Gasoline Stocks: Rose by 4.6 million barrels despite typically higher Thanksgiving demand.

The U.S. Energy Information Administration (EIA) will release official inventory data later on Wednesday, with analysts expecting a 700,000-barrel decline in crude stocks but a 639,000-barrel rise in gasoline inventories.