Oil prices surged nearly 1% on Thursday as tensions in the Middle East escalated following reports of ceasefire violations between Israel and Hezbollah. Brent crude hit $72.90 a barrel, rebounding from a recent dip. The OPEC+ meeting, originally scheduled for December 1, has been postponed to December 5, with analysts highlighting increased cohesion within the cartel.
The ceasefire between Israel and Hezbollah, which began on Wednesday, was breached as suspects were observed entering southern Lebanon, sparking concerns about border stability. This development led to a rise in oil prices and a slight dip in the euro and European stocks.
Goldman Sachs analysts expect the OPEC+ meeting to focus on production cuts and possible extensions into 2025. Compliance with cuts is improving among members, suggesting a more united front within the cartel. The bank anticipates a gradual increase in production starting in April 2025, with Brent crude reaching $76 a barrel by then.
Despite efforts towards decarbonisation, the demand for oil is expected to continue growing for at least another decade, driven by emerging markets and challenges in reducing emissions in industries like air travel and petrochemical production. Short-term supply concerns are reinforced by low inventory levels, with Brent crude projected to reach the mid-$80s in the first half of 2025 if Iran’s supply decreases due to stricter sanctions.
As investors keep a close eye on geopolitical tensions and OPEC+ decisions, the oil market remains influenced by both short-term developments and long-term structural trends shaping the global energy landscape.
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