Crude Oil Market Update: Price Stability Amid Geopolitical and Demand-Supply Challenges

Key Takeaways

Price Trends: WTI crude oil traded near $70, with marginal gains. MCX crude oil futures were up 0.13% at ₹5,937.
Demand-Supply Balance: OPEC+ meeting on December 5 could delay production increases due to weak demand and price concerns.
News Updates: Brent crude showed a 2.5% gain in two weeks but faced slight corrections on December 4.
Expert Opinion: Geopolitical factors, including tensions in West Asia and rebel offensives, could further impact prices.

Petroleum Prices: Crude Oil Price Overview

• WTI crude oil futures held steady near $70 per barrel on Wednesday, building on the 2.7% gain from the previous session. December crude oil futures were trading at ₹5,937 on Multi Commodity Exchange (MCX) during the initial hour of trading on Wednesday against the previous close of ₹5,929; up by 0.13 per cent
  

• Crude oil futures traded marginally higher on Wednesday morning after the US imposed sanctions on 35 entities and vessels that play a critical role in transporting Iranian petroleum to foreign markets.
  

• At 9.46 am on Wednesday, February Brent oil futures were at $73.68, up by 0.08 per cent, and January crude oil futures on WTI (West Texas Intermediate) were at $70.02, up by 0.11 per cent.

Petroleum Demand & Supply: Geopolitical Influences on Market Dynamics

• A press release by the US Department of Treasury, said these sanctions impose additional costs on Iran’s petroleum sector following Iran’s attack against Israel on October 1, as well as Iran’s announced nuclear escalations, building upon the sanctions issued on October 11. Petroleum revenues provide the Iranian regime with the resources to fund its nuclear programme, develop advanced drones and missiles, and provide ongoing financial and material support for the terrorist activities of its regional proxies, it said.
  

• The Acting Under Secretary for Terrorism and Financial Intelligence, Bradley T Smith, said Iran continues to funnel revenues from its petroleum trade toward the development of its nuclear programme, proliferation of its ballistic missile and unmanned aerial vehicle technology, and sponsorship of its regional terrorist proxies, risking further destabilizing the region.
  

• Market is also waiting for the outcome of the OPEC+ (Organization of the Petroleum Exporting Countries, and allies) meeting on December 5. Market reports indicated that the proposed meeting could delay the increase in crude oil production output due to factors such as weakness in crude oil prices and concerns over the declining demand for the commodity in some of the important consuming markets.
  

• Meanwhile, the industry body American Petroleum Institute’s (API) data showed an increase in crude oil inventories in the US for the week ending November 29. According to API, crude oil inventories increased by 1.23 million barrels for the week ending November 29. Market was expecting it to decline by 2 million barrels during the period.

Petroleum News: OPEC+ Meeting Expectations

• Crude oil prices were marginally down on December 4 in early Asia trade. Brent crude futures declined by 2 cents, or 0.03 percent, and touched $73.60 per barrel. Similarly, the U.S. West Texas Intermediate (WTI) crude futures followed the trend, dropping by 3 cents, or 0.04 percent, and moved to $69.91. However, on the previous day, Brent crude showed a major gain of 2.5 percent over the span of two weeks.
  

• The U.S. crude stockpile saw an oversupply of 1.2 million barrels in the last week. Similarly, gasoline also had an oversupply of 4.6 million barrels in the last week, including Thanksgiving Day, when demand is usually higher due to increased travel. OPEC+ countries are also looking to remove the supply restrictions on crude oil. However, rising tensions in West Asia could play a deciding factor in the OPEC+ decision.
  

• Crude oil prices surged 2.6% to settle at ₹5,929 per barrel, driven by expectations that OPEC+ will extend its current production cuts through Q1 2025. Saudi Arabia is also likely to lower crude prices for Asian buyers to the lowest levels in four years, signaling a competitive push in the region.
  

• Meanwhile, a 1.844 million-barrel draw in U.S. crude inventories, as per the EIA Petroleum Status Report, surpassed market expectations, further bolstering prices. However, gasoline and distillate stockpiles increased by 3.314 million and 0.416 million barrels, respectively, tempering some of the bullish momentum.

Expert Opinion: Market Levels and Trends

The crude oil market witnessed fresh buying as open interest increased by 0.79% to 11,235 contracts, alongside a ₹150 price gain. Support levels are identified at ₹5,821, with a further test possible at ₹5,713. Resistance is seen at ₹5,997, and a break above this could push prices toward ₹6,065. Overall, the market remains cautiously bullish amid mixed fundamental signals. Also contributing to oil's gains were several geopolitical factors, including a shaky ceasefire between Israel and Hezbollah, the curtailed declaration of martial law in South Korea, and a rebel offensive in Syria that threatens to draw in forces from several oil producing countries.