Israeli Sabre-Rattling Spooks Traders, Oil Jumps By Over 2%

Meanwhile, the efficacy of possible OPEC output delays is questioned: File Image/Pixabay

The shakiest of Middle East truces that oil investors placed so much faith in last week exhibited further fragility on Tuesday, with prices climbing over 2 percent due to Israel threatening to attack Lebanon.

Israel made the threat in the event Lebanon failed to dismantle Hezbollah and further hostilities occurred as a result; it also vowed that future attacks would go deeper and target the Lebanese state itself.

Nervous traders consequently caused Brent to settle up $1.79 at $73.62 per barrel, and West Texas Intermediate to settle up $1.84 to $69.94 per barrel, the biggest gains in two weeks.

Tuesday's trading was also said to be influenced by reports from four insiders that the Organization of the Petroleum Exporting Countries (OPEC) will likely decide to extend its production cuts when the cartel meets on Thursday.

Goldman Sachs stated in a note, "Given a rise in compliance with production cuts from Russia, Kazakhstan and Iraq, the lower Brent price level and indications in press reports, we assume an extension of OPEC+ production cuts until April."

But Bloomberg pointed out that even if OPEC's hike delays are enacted, "its oil production is still set to increase: the United Arab Emirates has been accorded the right to slowly ramp up an additional 300,000 barrels per day of production over the course of 2025, in recognition of recent investments in its capacity."

The news agency added, "Kazakhstan may also present a challenge next year, as it proceeds with a major expansion of the Tengiz oil field; the extra barrels may further test the ability of OPEC+ to keep world markets in balance."

In what may have been one of the most insightful takes in some time on the current state of oil trading, Stephen Innes, managing partner at SPI Asset Management, on Tuesday remarked that "Currently, every shift in the oil markets is transient: no one truly knows what will happen next."

Innes elaborated, "Right now, we are in a period of significant change and uncertainty for global economies: will [president-elect Donald] Trump follow through with his tariff threats? How will this impact U.S. interest rates? Can China's demand recover in the face of an [electric vehicle] conversion? Will Trump manage to broker peace in Eastern Europe? Will the dollar remain oppressively strong, weighing on commodity prices?"