Geopolitical Uncertainties Set to Support Oil Prices

The Israel-Hezbollah ceasefire takes out just one strand of the geopolitical premium in oil prices, with a lot of uncertainties remaining for 2025, including the Trump Administration’s sanctions against Iran and the Russia-Ukraine war, according to David Fyfe, chief economist at Argus.

“It’s a complex picture, but you’ve essentially got several strands of geopolitical complications,” Fyfe told CNBC on Friday.

The geopolitical complications are underpinning crude on the one hand, but they also bring heightened concerns about the global economy, acting in the opposite direction to weigh down on oil prices, the economist added.

The geopolitical complexities currently form a sort of “dynamic equilibrium,” Fyfe said.

OPEC+ needs to take a hard look at supply, considering that Argus sees about 1 million barrels per day (bpd) of global oil demand growth next year, which will be “more than matched” by non-OPEC+ supply growth, mostly from the U.S., Brazil, and Guyana, according to the economist.

The OPEC+ alliance needs to potentially further defer the easing of the cuts into 2025, he added.

On Thursday, OPEC said that the OPEC+ group would move the meeting on its near-term oil production plans to December 5 from December 1, due to a scheduling conflict.

Weak fundamentals could prompt the OPEC+ group at the December 1 meeting to delay – once again – the output increase currently planned to begin in January, according to recent market speculation.

The ongoing OPEC+ oil production cuts and the improved compliance with quotas from some producers are supporting Brent Crude, offering a modest upside to oil prices in the near term, according to Goldman Sachs.

The U.S. investment bank expects the OPEC+ cuts to be rolled over again and the easing of the output curbs could begin gradually in April 2025, after the first quarter of next year ends.

By Tsvetana Paraskova for Oilprice.com

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