Crude Oil Rises Amid OPEC+ Speculation, Tariff Uncertainty, and Geopolitical Tensions

Key Takeaways

1. Price Movements; Crude oil futures (Brent and WTI) saw slight increases, supported by anticipated OPEC+ production cuts.
2. Demand Trends: Chinese manufacturing data sparks hopes of demand recovery, but stimulus measures are critical for sustained growth.
3. Geopolitical Risks: Strengthened dollar, influenced by US tariff policies, increases crude oil costs globally.
4. Economic and Market Factors: Anticipation of a Federal Reserve rate cut in December influences market dynamics.
5. Expert Analysis: Stability or slight price increases are expected if OPEC+ maintains cuts.

Crude Oil Prices: Marginal Gains Amid Market Uncertainty

• Crude oil futures traded higher on Tuesday morning ahead of the OPEC+ meeting on December 5.
• February Brent oil futures were at $71.94, up by 0.15 per cent, and January crude oil futures on WTI (West Texas Intermediate) were at $68.18, up by 0.12 per cent.
• December crude oil futures were trading at ₹5791 on Multi Commodity Exchange (MCX) during the initial hour of trading on Tuesday against the previous close of ₹5779, up by 0.21 per cent, and January futures were trading at ₹5791 against the previous close of ₹5778, up by 0.22 per cent.

OPEC+ Meeting: Focus on Production Cuts for Price Stability

• The OPEC+ (Organization of the Petroleum Exporting Countries, and allies) group, which will meet on December 5, will discuss market policy for 2025. Market reports said that the meeting is likely to delay the increase in production output due to sustained weakness in oil prices and concerns over declining demand for the commodity.
• Though the manufacturing data from China released this week has increased hopes for a revival in the demand for the commodity, market analysts believe that China needs to announce more stimulus measures to boost the economic activity in that country.
• The recent statement of the US President-elect Donald Trump to impose steep tariffs on BRICS group of nations has also impacted the price of the commodity. Strengthening of dollar following his statement made the commodity costlier.
• Meanwhile, tensions prevailed in West Asia following the reports of ceasefire violations between Israel and Hezbollah. The peace deal between Israel and Hezbollah was brokered by the US and France. Market reports indicated that any escalation in tensions could disrupt crude oil supplies from West Asia.

Petroleum News: Global Factors Impacting Demand

• Markets had started the new month on a firmer note, but failure to maintain the upwards momentum has piled further pressure on OPEC and its allies to rein in output for the foreseeable future.
• Investors are also looking ahead to this month's FOMC meeting, after Federal Reserve Governor Christopher Waller said on Monday he is anticipating an interest rate cut in December.
• However, he added that the "decision will depend on whether data that we will receive before then surprises to the upside and alters my forecast for the path of inflation."
• Goldman Sachs cautioned Monday that the latest tariff proposal from President-elect Donald Trump would lift US inflation by nearly 1%, which adds an additional 10% tariff on goods from China and a 25% for Canada and Mexico.

Expert Opinion on Petroleum Market Trends

• It is anticipated that increase in the effective tariff rate would raise core PCE prices by 0.1%, we estimate that the proposed tariff increases would boost core PCE prices by 0.9% if implemented.
• Minister of state for finance Pankaj Chaudhary tabled the notification in the Rajya Sabha, announcing the removal of the tax imposed on companies such as state-run Oil and Natural Gas Corporation (ONGC) and private exporters such as Reliance Industries Ltd.
• The scrapping of windfall tax is expected to have limited impact on oil companies as the same had been reduced to nil on crude oil since September 18, 2024, and on petroleum products since February 29, 2024.