DTN Weekly Oil Update
Oil Futures Plunge on Israel-Hezbollah Ceasefire Report
VIENNA (DTN) -- West Texas Intermediate closest to expiration on the New York Mercantile Exchange and Brent crude on the Intercontinental Exchange fell more than $1.5/bbl Monday morning, following Axios reporting Lebanon and Israel have agreed to terms of a potential ceasefire deal.
With fundamentals turning increasingly bearish, oil prices have been propped up by fears of a broader regional conflict and military escalations threatening global supply. Most recently, prices have received support from worries around Israel potentially striking Iranian oil infrastructure. A ceasefire between Israel and Iran-aligned Hezbollah markedly reduces the associated risk premium.
Both IEA and EIA are expecting a global crude oil surplus next year despite OPEC+ production curtailments. A major disruption of Iranian output or exports could tilt the balance into deficit, but elevated prices would spur on even stronger non-OPEC production growth. As a consequence of multi-year output cuts, OPEC could in theory make up for a total loss of Iranian production, given the producer group's ample spare production capacity of over 4 million bpd.
Axios and Israeli media reported the Israeli cabinet will meet Tuesday to approve the US-backed deal.
Near 10:15 a.m. EST, WTI for January delivery was trading near $69.61 bbl, down $1.63, and Brent for January delivery was down $1.59, near $73.58 bbl. December RBOB shed $0.0544 gallon (gal) to $2.0070, and December ULSD dropped $0.0408 gal to $2.2341.
Karim Bastati can be reached at karim.bastati@dtn.com
