Oil prices edge higher; OPEC+ meeting looms after ceasefire, US inventory draw

Investing.com -- Oil prices rose Wednesday as traders evaluated a ceasefire deal between Israel and Hezbollah while also digesting an unexpected, substantial draw in US oil inventories ahead of Sunday's OPEC+ meeting.

At 08:40 ET (13:40 GMT), Brent oil futures rose 0.4% to $72.64 a barrel and West Texas Intermediate crude futures climbed 0.6% to $69.19 a barrel.  Israel-Hezbollah ceasefire in focus 

Oil prices have bounced to a degree from their losses over the past two sessions after media reports initially suggested that an Israel-Hezbollah ceasefire was close.

US President Joe Biden announced the ceasefire deal on Tuesday, with the agreement set to see Israeli forces withdraw from Lebanon within 60 days, while Hezbollah will move its forces away from the area between the “Blue Line,” the unofficial border between Lebanon and Israel. 

The agreement presents a deescalation in the Middle East conflict after 13 months of intense fighting, although hostilities between Israel and Hamas are still expected to continue in Gaza. 

Still, the deal with Hezbollah helped quell some concerns that persistent fighting in the Middle East will disrupt oil supplies from the crude-rich region. 

That said, there will still be a degree of a risk premium in the crude markets after an escalation in the Russia-Ukraine war last week, which saw investors fear any potential disruptions in Moscow’s crude output.  US oil inventories unexpectedly shrink - API 

The crude market received a boost on Tuesday after data from the American Petroleum Institute showed that US oil inventories shrank by nearly 6 million barrels in the week to Nov. 22, a surprise given analysts had been expecting a small build.

This data increased hopes that US fuel demand remained strong even as the holiday driving season ended, and will tighten oil supplies in the coming months.

The API data usually heralds a similar reading from government inventory data , which is due later Wednesday. OPEC+ meeting looms 

Activity in the crude markets is expected to be limited for the rest of the week as the US is celebrating Thanksgiving on Thursday and Friday usually sees quiet trading as a result.

Attention now turns to a meeting of the Organization of Petroleum Exporting Countries and allies, known as OPEC+, at the start of December.

The group of top producers is discussing a further delay to the oil output increase set for January, according to a report by Reuters.

The group, which produces about half the world's oil, had aimed to gradually ease production cuts through 2024 and 2025, but weaker global demand and rising output outside OPEC+ have cast doubt on that plan. 

"Crude oil prices continue to face stiff resistance around US$75/bbl due to demand concerns. Any premature production hike from the group could push the market into deeper oversupply," said analysts at ING, in a note. 

(Ambar Warrick contributed to this article.)

Source: Investing.com