Key Points
- Oil prices fall as Israel-Lebanon ceasefire deal is reported.
- Analysts cite low supply risks and geopolitical tensions easing.
- OPEC+ to decide on maintaining current output cuts next month.
Oil prices fell sharply Monday following reports that Israel and Lebanon have agreed to terms for a ceasefire in the ongoing conflict between Israel and Hezbollah. Unnamed senior U.S. officials confirmed the potential deal, fueling the decline in crude futures.
Brent and WTI crude prices fall over $2 per barrel
Brent crude futures dropped $2.16, or 2.87%, to settle at $73.01 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell $2.30, or 3.23%, to close at $68.94.
Israel announced it is working toward a ceasefire but acknowledged unresolved issues. Lebanese officials expressed cautious optimism but noted distrust toward Israeli Prime Minister Benjamin Netanyahu.
“The news of a ceasefire between Israel and Lebanon seems to be driving the price drop, even though the conflict has not disrupted oil supply,” said Giovanni Staunovo, an analyst at UBS. Staunovo added that the risk premium for oil had already been low before this decline.
Phil Flynn, senior analyst at Price Futures Group, pointed out that oil prices often fluctuate on fears of supply disruptions. “A report that Netanyahu approves a Lebanon ceasefire deal in principle could be bearish for oil markets, but more details are needed,” Flynn noted in a report.
According to reuters, last week, both Brent and WTI crude reached their highest settlement levels since Nov. 7, spurred by geopolitical tensions, including Russia’s use of hypersonic missiles against Ukraine. The strikes followed Ukraine’s attacks on Russia using U.S. and British-supplied weapons.
OPEC+ meeting to discuss oil output levels for 2024
Meanwhile, OPEC+ is scheduled to meet online on Dec. 1, with member Azerbaijan indicating that the group may maintain current oil output cuts into January. The coalition, which includes the Organization of the Petroleum Exporting Countries and allies such as Russia, has avoided increasing production this year amid demand concerns.
Azerbaijan’s Energy Minister Parviz Shahbazov told Reuters that output levels for 2024 will be discussed during the meeting.
