London: Oil prices climbed on Monday after OPEC+ opted to delay a planned production increase until January, bolstering market sentiment amid renewed geopolitical tensions in the Middle East. Brent crude saw a 1.8% uptick, reaching $74.40 a barrel after a 3% decline last week. West Texas Intermediate (WTI) followed suit, rising 1.9% to $70.79 per barrel.
The OPEC+ coalition had initially aimed to raise output by 180,000 barrels per day in December but has now decided to extend its production cuts to support a market still struggling with tepid demand and oversupply risks. This strategic decision aims to maintain stability as global demand uncertainties persist, especially in key markets like China.
Tensions in the Middle East added further pressure to the oil market as Iran escalated its rhetoric against Israel. Iranian Supreme Leader Ayatollah Ali Khamenei, in a speech on Saturday, threatened a “crushing response” to Israeli actions. Citing sources, The Wall Street Journal reported that Iran warned allies an attack might be launched after Tuesday’s U.S. presidential election but before the January inauguration. According to the report, Iran suggested the assault would likely go beyond missile and drone strikes.
Analysts at RBC Capital Markets LLC noted in a recent research note that fears of a potential oversupply in the market had weighed heavily on sentiment but that ongoing risks in the Middle East could bring critical oil facilities into the line of fire. “A continuing cycle of retaliatory strikes between Israel and Iran raises the risk that oil facilities will be caught in the crosshairs,” the note read.
Oil prices have been volatile in recent weeks, fluctuating between oversupply concerns and geopolitical uncertainties. A strike by Israel on Iranian assets last week spared critical energy infrastructure, initially driving prices down, but markets rebounded as concerns over the potential for conflict escalation resurfaced.
This week, the oil market faces several important events that could impact price stability, including the U.S. presidential election and a session of China’s top legislative body, which may provide new economic policies. Additionally, Saudi Aramco, the world’s largest oil company, is expected to announce its December pricing strategy. Analysts predict that Aramco will lower prices for Asian markets to maintain competitiveness amid ongoing demand struggles in the region.
As investors keep a close watch on these developments, the outlook for oil remains mixed, with the delicate balance between supply adjustments and geopolitical risks likely to set the tone for the coming months.
