On Monday, oil prices surged as Middle East tension escalated, while the forecast of a lower interest rate has buoyed hopes of demand recovery.
In the Asian morning session, Brent futures for December contracts rose by 0.65% to $74.17 a barrel. West Texas Intermediate futures for November delivery increased by 0.70% to $71.50 per barrel.
According to reports, traders have been factoring in a risk premium to oil prices due to ongoing tensions in the Middle East, with little indication that the situation is easing.
Israel continued its strikes in Gaza and Lebanon, sustaining fears of a potential full-scale war in the region. Hezbollah recently threatened retaliation against Jerusalem following accusations that the country had destroyed several electronic devices used by the Lebanese group.
Meanwhile, crude prices were holding on to a two-week recovery from nearly three-year lows as output disruptions following Hurricane Francine pointed to a tighter market.
Furthermore, oil futures surged after the Federal Reserve lowered its key interest rates more than anticipated last week and disclosed the beginning of an easing cycle. US crude stockpiles declined to their lowest level in a year, which has also favored oil recovery.
OPEC+ Prepares to Surge Oil Production in December
Despite cheers from oil market analysts, Commerzbank has reversed its December oil prices forecast as OPEC+ gears up to increase output by year-end.
The German bank reports that the International Energy Agency anticipates a surplus of approximately 1.80 million barrels in the first quarter of 2025, with comparable oversupply projected for the subsequent quarters.
Commerzbank also noted that the projected market balance for the coming year does not allow for an increase in supply from the Organization of the Petroleum Exporting Countries (OPEC+) and its allies.
However, the bank indicated that the organization’s demand for oil is expected to decrease next year, as crude supply from non-OPEC+ sources is likely to grow faster than global demand.
