(Bloomberg) -- Oil fell, reversing earlier gains, on a report that President Joe Biden will announce that Israel and Hezbollah have reached an agreement to cease fighting.
West Texas Intermediate slid below $69 a barrel, while Brent dropped beneath $73. Both benchmarks had risen earlier in the session after Bloomberg reported key OPEC+ nations are discussing delaying planned production increases.
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A cease-fire deal may reduce the risks to flows from the Middle East, which have helped prop oil prices even amid widespread expectations of an oversupply of crude next year. Biden will announce the agreement on Tuesday, and it would be implemented immediately, CBS News said in a post on social media platform X, citing a US official.
Prices may slide at least $3 a barrel if the cease-fire materializes, said Robert Yawger, director of the energy futures division at Mizuho Securities USA.
A truce “would imply that Iran gave the green light for Hezbollah to accept the cease-fire, which would probably make it less likely Israel will attack Iran’s nuclear facilities with the backing of the Trump Administration,” Yawger said.
Traders are also assessing President-elect Donald Trump’s threat of new tariffs on key trading partners. Trump’s announcement of the potential levies on Canada, Mexico and China initially sparked a rally in the dollar that weighed on commodities priced in the currency.
Limiting the declines, some OPEC+ members have expressed doubt that they can implement a 180,000 barrel-a-day increase scheduled for January, and they see a need to postpone further hikes planned for the following months. The group is meeting on Dec. 1 to decide on the plans.
Traders are expecting choppy trading ahead as they assess number of catalysts for the market’s next move — including the policies of a second Trump presidency and geopolitical risks linked to Russian and Iranian supplies next year.
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