Oil prices rose on Wednesday as investors assessed the impact of a ceasefire deal between Israel and Hezbollah, and an upcoming meeting of OPEC+ on Sunday.
“Investors are assessing the potential impact of a ceasefire in a conflict-ridden region, which has influenced recent market sentiment,” Arslan Ali, analyst at Fxempire, said in a report.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was $69.03 per barrel, up 0.4%. Brent crude oil on the Intercontinental Exchange was $72.58 per barrel, also up 0.4% from the previous close.
Both benchmarks had retreated on Tuesday after the incumbent US President Joe Biden announced that Israel and Lebanon-based militant outfit Hezbollah, agreed to a ceasefire deal.
Carsten Fritsch, commodity analyst at Commerzbank AG, said:
The Middle East conflict has not yet led to any supply shortfalls on the oil market. However, a ceasefire could also ease the still flaring conflict between Israel and Iran, which could have the potential to disrupt oil supplies.
Impact of Trump’s tariff threats
Meanwhile, on Monday, US President-elect Donald Trump said on a social media post that he intended to sharply increase tariffs on China, Mexico and Canada.
Trump said the US government would impose a 25% tariff on goods imported from Canada and Mexico. On China, another 10% tariff would be imposed on an already proposed 60%.
The increases in tariffs could intensify global trade frictions between the US and especially China. Beijing had hinted that it could retaliate with tariffs of its own.
“For energy markets, new tariffs could make crude oil and natural gas expensive in the US as Canada is one of the major suppliers of energy products,” analysts at ING Group said in a note.
On the other hand, tight supplies from external markets could lead to bigger investments into shale drilling that may help push domestic production higher.
OPEC’s meeting in focus
Investors will eagerly wait for the ministerial meeting of the Organization of the Petroleum Exporting Countries and allies on Sunday.
In the meeting, the cartel and its allies are expected to take a decision on their output policy beyond 2024.
The market expects the group to extend their steep voluntary production cuts, which are set to expire at the end of December.
So far, OPEC+ has planned a gradual increase in production from January, but this would lead to a considerable oversupply next year based on IEA forecasts.
Commerzbank AG believes that OPEC+ may extend their production cuts.
Prices would get support if the cartel extends their output cuts. Poor demand and concerns over an oversupply even without OPEC’s barrels have led to lower prices over the last few months.
Oil price forecast
As for WTI prices, the resistance is seen around $70.28 per barrel. If prices move towards that level, it could signal a bullish momentum.
However, the 50-day and 200-day exponential moving averages at $69.42 and $69.52, respectively, could add further resistance.
Support is seen at $68.01 per barrel, followed by $67.28 a barrel.
“While short-term sentiment is cautious, traders should closely watch price action around the $68.93 pivot for clearer directional cues,” Fxempire’s Ali said.
For Brent crude, resistance remains at $73.73 per barrel and support at $71.58 a barrel.
“A break below $71.58 could signal continued bearish sentiment, while a move above $72.50 would shift the bias to bullish,” Ali added.
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