Crude oil futures were trading almost flat on Wednesday, trading at $69.14 during the European trading session, which is considered a pivotal point for traders in the market. Oil prices witnessed a slight increase today, driven by increased demand in the United States, the world’s largest consumer of crude oil, which boosted optimism in the markets. With the easing of geopolitical tensions in the Middle East, which had raised concerns about supply disruptions, the chances of market stability increased. In addition, the slight decline in the value of the US dollar contributed to stimulating demand for oil, as it made crude cheaper for foreign investors.
On the other hand, the global benchmark Brent crude rose by 0.43% to reach $72.49 per barrel, compared to the previous session’s close of $72.18. The US West Texas Intermediate crude rose by almost the same percentage to $69.14 per barrel, after closing at $68.53 in the previous session. The American Petroleum Institute data showed a larger-than-expected drop in US crude oil inventories, which contributed to strengthening the upward trend in prices. The US Energy Information Administration announced a decrease in inventories by 5.93 million barrels last week, contrary to expectations of an increase of 250,000 barrels, which reinforces optimism about the recovery in demand in the US market.
The US Energy Information Administration is expected to release its official report on inventories during the day, which may affect the market movement. The weakness of the US dollar, which fell by 0.15% to reach 106.809, also contributed to strengthening oil prices, which enhances hopes for an increase in global demand for crude. Despite these positive factors, crude oil futures may remain under pressure, as they continue to try to recover from successive declines in the previous days.
Markets focus on OPEC+ meeting and the stability of the geopolitical situation
Oil markets are responding dynamically to recent developments, as the agreement to stop geopolitical tensions came into effect on Wednesday, after US and French mediation. The agreement has brought a sense of stability to the geopolitical landscape, but traders remain cautious about the sustainability of the cessation of geopolitical tensions.
In the same context, investors are awaiting the upcoming OPEC+ meeting on December 1, where expectations indicate that the organization, which controls about half of the world’s oil supplies, may decide to postpone the planned increase in production in January. It seems that the potential extension of the current production cuts by 2.2 million barrels per day may play a role in supporting prices until early 2025.
However, crude oil futures remain under pressure, affected by consecutive declines over two days, which makes them struggle to recover. Traders are closely watching the stability of the agreement to stop geopolitical tensions as a major factor that could affect the market’s path.
In the short term, the easing of geopolitical tensions may limit the potential for an increase in oil prices, with the risk of immediate supply disruptions receding. However, if this agreement fails or tensions renew, prices may witness a rapid jump in response to the possibility of new supply constraints.
On the other hand, OPEC+ is considering postponing the planned increase in production, in light of lower-than-expected demand, especially from China, and increased production from non-OPEC countries. This decision could contribute to strengthening prices, despite ongoing concerns about oversupply. Finally, recent US data indicates a larger-than-expected decline in oil inventories, reflecting tightening supplies in the US market, which could provide temporary support to prices.
US Supply Trends, Trade Risks and Impact on Oil Prices
US crude inventories fell sharply last week, falling by 5.94 million barrels, according to data from the American Petroleum Institute (API), beating expectations for a 600,000-barrel decline. Fuel inventories, however, rose, reflecting mixed demand.
Amid ongoing supply uncertainty, US President-elect Donald Trump has proposed imposing a 25% tariff on all imports from Mexico and Canada. Although crude oil is exempt from the policy, such trade measures could indirectly impact energy markets by disrupting global trade flows.
Reports from major investment banks such as Goldman Sachs and Morgan Stanley suggest that current oil prices are undervalued, as the market struggles with a supply deficit and potential threats from Iranian production. These banks expect WTI crude to trade in the $65-70 per barrel range in the near future, influenced by winter weather conditions, shale oil production levels and demand trends in China.
Oil Prices Market Outlook: Neutral to Bullish Outlook
While geopolitical factors and supply pressures are helping to stabilize oil prices, the market is awaiting OPEC+’s announcement on extending production cuts. A move above $69.14 should signal the start of bullish momentum, but analysts anticipate minimal moves during the holiday week due to limited trading activity. They expect clearer signals from OPEC+ before any significant shifts occur.
Traders remain awaiting the outcome of the OPEC+ meeting on December 1, as this meeting will have a major impact on determining the path of crude oil prices during the first quarter of 2025. However, potential trade tensions, such as US President-elect Donald Trump’s threat to impose 25% tariffs on oil imports from Mexico and Canada.
