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WTI crude oil futures hovered around $69 per barrel (Figure 1), caught between geopolitical tensions and easing Middle East concerns. Russia’s conflict with Ukraine intensified as Ukrainian forces used Western-supplied missiles for the first time, and President Putin expanded Russia’s nuclear doctrine. In Lebanon, reports suggested progress toward a cease-fire between Hezbollah and Israel, though negotiations continue. On the supply side, Norway’s Johan Sverdrup oil field resumed two-thirds of its output after a brief halt, while forecasts from the IEA point to a potential oil surplus next year due to weaker Chinese demand. |
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Figure 1: Crude oil NYMEX, front month (red), EUR/USD (black) Traders are also anticipating the OPEC+ meeting scheduled for December 1st, amid speculation that the cartel may delay output increases. However, a rise in US crude inventories capped further price gains. Data from the EIA showed that US crude oil inventories increased by 0.5 million barrels last week, exceeding expectations of a 0.4-million-barrel build. Gasoline stocks also rose by 2.1 million barrels, outpacing forecasts of a 1.6-million-barrel increase. The Euro fell to $1.052 (Figure 1), the lowest level since mid-October 2023, pressured by the dollar’s strength amid growing concerns about downside risks to the Eurozone economy. Meanwhile, in its annual Financial Stability Review, the ECB highlighted that heightened geopolitical tensions and policy uncertainties are amplifying sovereign vulnerabilities, while rising global trade tensions are increasing the likelihood of adverse economic shocks. On the other hand, negotiated wages in the Euro Area rose 5.4% y/y in Q3, the most since the euro was introduced, complicating the ECB’s plans for interest rate cuts. The ECB is still expected to deliver its fourth 25 bps rate cut in December meeting. The ECB has cut rates three times since June as inflation nears its 2% target, but growth forecasts have been downgraded twice. |