The ceasefire agreement is dragging down oil prices, may oil prices test the lower edge of the box again? Pay attention to EIA reports and weekend OPEC+meetings
2024-11-27
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On Wednesday (November 27th), US crude oil fell slightly during the Asian trading session, trading around $68.60 per barrel. Due to the ceasefire agreement between Israel and Lebanon, the risk premium of oil has been reduced. However, OPEC+will hold a meeting on Sunday and may consider extending production cuts, which still provides support for oil prices.
Fundamentally, the bullish sentiment towards oil prices is unfavorable, and the US dollar index remains high. With the support of the geopolitical situation, oil prices have not been able to break through the box pressure. After the sentiment dissipates, they have returned to a volatile downward trend, and there is a possibility of testing the lower edge of the box again.
This trading day focuses on changes in the geopolitical situation and EIA inventory data.
The latest data from the American Petroleum Institute (API) shows that US crude oil inventories decreased last week, while oil inventories increased. In the week ending November 22, crude oil inventories decreased by 5.94 million barrels. Analysts predict a decrease of approximately 600000 barrels.
Israel and Hezbollah reached a ceasefire agreement mediated by the United States and France, which came into effect on Wednesday of this week
US President Biden stated on Tuesday that the ceasefire between Israel and Hezbollah will take effect on Wednesday, following the agreement reached through the mediation of the United States and France.
Biden said that the agreement aims to permanently cease hostilities and clear the way for an end to the conflict that has caused thousands of deaths since the outbreak of the Gaza War last year. After the Israeli Security Cabinet approved the agreement with a vote of 10-1.
Biden immediately delivered a speech at the White House, stating that he had spoken with Israeli Prime Minister Netanyahu and Lebanese Prime Minister Najib Mikati. Biden said that the battle on the Israel Lebanon border will end at 4am local time.
Biden said, "This is to permanently cease hostilities. The remnants of Hezbollah and other terrorist organizations will not be allowed to threaten Israel's security again." Biden said that Israel will gradually withdraw its troops within 60 days, and the Lebanese army will control the territory near the border with Israel to ensure that the Hezbollah will not rebuild its infrastructure there.
He said, 'Civilians from both sides will soon be able to safely return to their communities.' Lebanese Foreign Minister Abdullah Bou Habib earlier stated that with the withdrawal of the Israeli army, the Lebanese army will deploy at least 5000 soldiers in southern Lebanon
Israeli Prime Minister Netanyahu earlier stated that he is ready to implement the ceasefire agreement and will respond strongly to any violations by Hezbollah, while declaring that Israel will retain "complete military freedom of action".
Netanyahu said that a ceasefire would allow Israel to focus on responding to the threat from Iran, replenish depleted weapons supplies, give the military a break, and isolate Hamas. This Palestinian radical organization launched an attack on Israel from Gaza last year, triggering a war in the region.
UN Special Coordinator for Lebanon Jeanine Hennis Plasschaert welcomed the ceasefire agreement and praised the parties for "seizing the opportunity to end this destructive chapter".
Now is the time to consolidate today's achievements through concrete actions. However, there is no indication that the ceasefire in Lebanon will accelerate Israel and Hamas to reach a ceasefire and hostage release agreement in Gaza
OPEC+discusses further postponement of production increase
Two OPEC+sources said on Tuesday that member countries are discussing further delaying the oil production increase plan originally scheduled to begin in January. The group will hold a meeting on Sunday to decide on production policies for the first few months of 2025.
On Tuesday, OPEC+member countries Iraq, Saudi Arabia, and Russia held talks in Baghdad, Iraq. The oil production of OPEC+accounts for about half of the world's total production, and the organization had planned to slightly increase oil production in multiple months of 2024 and 2025 to gradually withdraw from production cuts.
However, the slowdown in global demand and the increase in production by non OPEC+oil producing countries have affected this plan. Azerbaijan's Energy Minister Parviz Shahbazov told Reuters on Monday that OPEC+may consider maintaining the current production reduction plan after January 1st at its meeting on Sunday.
According to OPEC+sources, the meeting will be held online. Last week, OPEC+sources stated that production increases may be postponed until the first quarter. Analysts from Deutsche Bank predict that it will be postponed until at least the end of the first quarter.
Trump does not intend to exempt oil from the new tariff plan targeting Mexico and Canada
Trump plans to impose tariffs on crude oil from major suppliers Canada and Mexico. Major industry organizations in the United States say that imposing tariffs on oil is a mistake. Oil analysts and traders warn that this move will raise oil prices, and the Midwest region of the United States, which relies most on Canadian crude oil, will see a surge in oil prices.
Sources said on Tuesday that US President elect Trump does not intend to exempt crude oil from his planned 25% import tariffs on Canada and Mexico, with the oil industry warning that the policy could harm consumers, industry, and national security.
According to data from the US Department of Energy, Canada and Mexico are the main sources of crude oil imports for the United States, accounting for about a quarter of the total oil processed by US refineries into fuels such as gasoline and heating oil.
The oil industries in the United States and Canada have always been optimistic that Trump's extensive protectionist trade measures plan will open up oil imports, as many refineries in the United States rely on these two countries and have equipment specifically designed to process the types of oil from these two countries.
Meanwhile, major oil industry organizations in the United States have stated that imposing tariffs would be a mistake, exposing a rare rift between the industry and Trump.
Comprehensive trade policies may push up import costs, reduce the availability of petroleum raw materials and products, or trigger retaliatory tariffs, which could affect consumers and weaken our advantage as a leading global producer of liquid fuels
A spokesperson for the American Fuel and Petrochemical Manufacturers Association (AFPM), which represents refineries, said.
AFPM stated that its industry will "continue to urge officials not to adopt any policies that could undermine America's energy advantage.
At the same time, the American Petroleum Institute (API) stated in response to questions about tariff threats that maintaining cross-border energy trade is crucial.
Oil industry analysts and traders have also warned that this move could raise oil prices for US refineries, squeeze profit margins, and push up fuel costs.
According to data from the US government statistics department, in 2024, the US will import approximately 5.2 million barrels of crude oil and oil products from Canada and Mexico per day, with over 4 million barrels coming from Canada.
The biggest impact will come from the taxation of Canadian crude oil, which is an important source of supply for refineries in the Midwest of the United States.
On a technical level, the daily chart of US crude oil continues to decline, with the moving average turning downwards and the KDJ indicator showing a dead cross. There are signs of the end of this rebound, and it is not ruled out that the support at the lower edge of the box around $66.50 may be tested again.
It is worth noting that the fundamentals are mixed, and the probability of oil prices breaking below or rising directly in the short term is not high, and they still tend to fluctuate mainly in a box like pattern.
Daily chart of US crude oil
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