Oil heads for 3% weekly decline as supply risks ease

8:27 am Friday, November 29th, 2024

By Alex Lawler and Enes Tunagur

LONDON (Reuters) -Oil prices fell on Friday, heading for a weekly drop of more than 3%, pressured by easing concern over supply risks from the Israel-Hezbollah conflict and the prospect of increased supply in 2025 even as OPEC+ is expected to extend output cuts.

Four Israeli tanks have entered the western side of the Lebanese border village of Khiyam, Lebanon’s official news agency said on Friday, though both sides have made accusations of ceasefire violations. Nonetheless, the ceasefire that took effect on Wednesday has reduced oil’s risk premium, sending prices lower.

Brent crude was down 45 cents, or 0.6%, at $72.83 a barrel by 1214 GMT. U.S. West Texas Intermediate crude futures were at $68.68, down 12 cents, or 0.2%, from the last close before Thursday’s Thanksgiving holiday. Brent is down 3% over the week while WTI has lost 3.7%.

The Middle East conflict has not disrupted supply, which is expected to be more ample in 2025. The International Energy Agency sees the prospect of more than 1 million barrels per day (bpd) of excess supply – equal to more than 1% of global output.

“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,” said Tamas Varga of oil broker PVM.

The OPEC+ group comprising the Organization of the Petroleum Exporting Countries and allies including Russia delayed its next policy meeting to Dec. 5 from Dec. 1. OPEC+ is expected to decide on a further extension to production cuts at the meeting.

“Although we expect the OPEC+ group will opt to roll over the existing cuts into the new year, this will not be sufficient to fully erase the production glut we forecast for next year,” BMI analysts said in a report.

Brent could average $74.53 a barrel in 2025, a Reuters poll of 41 analysts suggests. That marked the seventh consecutive monthly downward revision in the Reuters poll.

(Reporting by Alex Lawler, Enes Tunagur, Colleen Howe and Sudarshan VaradhanEditing by David Goodman)