Oil Drops Below $69 Amid Middle East De-escalation

Oil dropped as light pre-holiday trading exacerbated signs of diminishing risks from the conflict in the Middle East.

West Texas Intermediate shed 3.2% to settle below $69 a barrel. The Israeli ambassador to the US said a cease-fire agreement between his country and Lebanon’s Hezbollah could happen “within days.” Brent slid 2.9% to settle near $73.

A cease-fire in Lebanon would reduce the likelihood that the Trump administration will impose hawkish sanctions on Iranian crude in January, said Rob Thummel, senior portfolio manager at Tortoise Capital.

“It’s a supply problem,” Thummel said. “If Iran’s going to keep the supply on the market, then that means you’ve got a fair amount of supply next year potentially coming online.”

Iran currently supplies about 3.4 million barrels a day as the third-largest OPEC producer. A maximum-pressure campaign from the US against Iran could wipe out 500,000 barrels a day, Rapidan Group President Bob McNally said last week.

Crude is also jumpy ahead of the Thanksgiving holiday and an OPEC+ meeting this weekend, when the cartel will decide whether to add extra barrels to the market. Traders and analysts surveyed by Bloomberg last week anticipate OPEC+ will pause its scheduled January production hike.

The UK government expanded its sanctions against Russia’s energy industry on Monday, offering some price support.

Crude has traded in a range of about $6 a barrel since the middle of October — alternating between weekly gains and losses — as fresh tensions in Russia and Ukraine wrestled with signs of cooling risk in the Middle East. Some indications of improvements in physical markets have countered the prospects of oversupply.

Oil Prices:

• WTI for January delivery declined 3.2% to settle at $68.94 a barrel.
• Brent for January settlement fell 2.9% to settle at $73.01 a barrel.