Oil prices experienced a decline on Friday, resulting in a weekly loss of over 3%. This drop was driven by reduced concerns over supply risks stemming from the Israel-Hezbollah conflict and the anticipation of increased supply in 2025, despite expectations that OPEC+ will extend output cuts.
Key Highlights:
Price Movements:
Brent crude fell by 34 cents (0.46%) to settle at $72.94 per barrel.
U.S. West Texas Intermediate (WTI) crude futures decreased by 72 cents (1.05%), closing at $68.
Overall, Brent declined 3.1% for the week, while WTI lost 4.8%.
Market Activity:
Trading activity was subdued due to the U.S. Thanksgiving holiday, contributing to the price movements.
Geopolitical Context:
An Israeli military incursion into a Lebanese border village was reported, but the ceasefire established on Wednesday has reduced the oil risk premium, leading to lower prices despite ongoing tensions and accusations of violations from both sides.
Importantly, the conflict has not disrupted oil supply, which is expected to be more abundant in 2025.
Supply Forecast:
The International Energy Agency (IEA) anticipates more than 1 million barrels per day (bpd) of excess supply in 2025, which represents over 1% of global output.
Tamas Varga from oil broker PVM noted, “The updated snapshot insinuates that next year promises to be looser than the current one and oil prices are to average below the 2024 level.”
OPEC+ Meeting:
The OPEC+ group, which includes the Organization of the Petroleum Exporting Countries and allies like Russia, has postponed its next policy meeting to December 5 from December 1.
Analysts expect the group to consider extending production cuts at this meeting.
Saxo Bank analyst Ole Hansen highlighted that the group must address the risk of further price weakness due to potential oversupply from non-OPEC+ producers next year.
Future Price Predictions:
A Reuters poll of 41 analysts suggests that Brent could average $74.53 per barrel in 2025, marking the seventh consecutive monthly downward revision in the poll.