Oil rises as Israel-Hezbollah ceasefire violated, OPEC+ delays meeting

Oil prices rose nearly 1% Thursday after Israel reported ceasefire breaches with Hezbollah, reigniting Middle East tensions. Brent hit $72.90 a barrel, recovering recent losses. Meanwhile, OPEC+ postponed its meeting, with analysts noting stronger cartel cohesion and compliance.

Oil prices climbed nearly 1% on Thursday morning, driven by escalating tensions in the Middle East after Israel reported violations of its ceasefire agreement with Hezbollah.

Israeli military’s spokesperson Avichay Adraee wrote on social media X that “a number of suspects were observed arriving, some of them in vehicles, to several areas in southern Lebanon, which constitutes a breach of the agreement.”

Brent crude rose to $72.90 a barrel by midday trading Europe, recovering from a two-day slump. The euro slipped 0.2%, and European stocks trimmed earlier gains following the news.

The truce, which began Wednesday, was intended to end 14 months of conflict along the Israel-Lebanon border, yet renewed hostilities have added to fresh supply fears.

The breach raises concerns about the fragile stability along the Israel-Lebanon border, where residents have been urged not to return due to safety concerns.

OPEC+ meeting delayed: Goldman Sachs flags improving cartel cohesion

The OPEC+ alliance has rescheduled its crucial meeting on oil production policy to 5 December 2024, postponing it from the originally planned 1 December 2024, as several Ministers will be attending the 45th Gulf Summit in Kuwait.

Analysts expect the meeting to focus on the alliance’s production cuts and their potential extension into 2024.

While OPEC+ had planned to gradually increase output if prices stabilised, persistently low prices have led to postponements. Some suggest the cuts could extend longer-term due to the market’s slow response.

Goldman Sachs analysts, led by Daan Struyven, anticipate a measured approach from OPEC+.

“Any ramp-up in OPEC+ production will be gradual and data-driven,” Struyven said, adding that compliance with production cuts is rising among members, a signal of stronger cohesion within the cartel.

Analysts now speculate that production caps could become a long-term strategy.

“The rise in compliance strengthens Saudi Arabia’s modesty positive revenue incentives to extend cuts,” Struyven added.

The investment bank forecasts gradual increases in production only from April 2025, versus January 2025 previously, with Brent crude averaging $76 a barrel by 2025 and peaking at $78 in June of that year.

Market dynamics and inventory trends

Recent US Energy Information Administration data indicates crude oil and gasoline inventories are hovering at five-year lows, reinforcing short-term supply concerns.

Goldman Sachs expects Brent crude to rise to the mid-$80s in the first half of 2025 if Iran’s supply declines by 1 million barrels per day due to stricter sanctions.

Despite global efforts toward decarbonisation, the bank forecasts that oil demand will grow for at least another decade, driven by emerging markets and the slow pace of decarbonisation in air travel and petrochemical production.

Oil price outlook

While geopolitical tensions and OPEC+ strategies shape the short-term outlook, broader structural trends—including energy transition challenges—are expected to sustain demand in the longer term.

Goldman Sachs anticipates oil demand to continue growing for another decade, driven by rising energy needs in emerging markets as their economies expand, coupled with the ongoing challenges of decarbonising air travel and petrochemical production.

For now, investors remain watchful of developments in the Middle East and OPEC+ policy decisions, which could significantly influence market dynamics heading into 2025.