Oil prices witnessed a slight decline on Friday, peaking at a weekly loss of 4.55% for WTI Crude Oil and 2.26% for Brent. This downward pressure was driven by a reduction in concerns about supply disruptions due to the Israel-Hezbollah conflict and growing expectations of increased global oil supply in 2025. These factors outweighed market speculation that OPEC+ might extend its current output cuts.
Despite the ongoing conflict in the Middle East, oil supply has remained largely unaffected. Moreover, the International Energy Agency (IEA) has forecasted a potential surplus of more than 1 million barrels per day (bpd) in 2025, which would account for over 1% of global production.
Trading volumes were muted due to the US public holiday on Thursday. With significant uncertainty surrounding supply this week, OPEC is set to meet on December 5, 2024 (tomorrow) to discuss its output strategy for 2025. Originally scheduled for December 1, 2024, the meeting is now expected to focus on whether OPEC+ will extend its production cuts and to decide on the production policy for early 2025.
On Monday, oil prices remained fairly stable. However, a ceasefire agreement between Israel and Lebanon, which came into effect last Wednesday, appeared increasingly shaky. The Israeli military reported on Monday that it had carried out strikes on targets in Lebanon, with both Israel and Hezbollah accusing each other of violating the ceasefire.
Oil prices saw a rise on Tuesday, with WTI Crude Oil opening at $68.16 and Brent at $71.93, before closing at $69.94 and $73.62, respectively. This increase came amid heightened concerns that Israel would attack Lebanon should its ceasefire agreement with Hezbollah collapse. Traders were also positioning themselves in anticipation of an extension of supply cuts by OPEC+ during its meeting. The US sanctions targeting Iranian crude further supported prices.
A Reuters survey showed that OPEC oil output rose for a second consecutive month in November, reaching 26.51 million barrels per day (bpd), up by 180,000 bpd from October. Libya saw the largest increase following the resolution of a dispute over control of its central bank, enabling full production at its oilfields. Notably, Libya is exempt from OPEC+ agreements on output limits.
OPEC+ has been withholding 2.2 million barrels of oil per day for more than a year, and it may now need to consider these cuts as a long-term policy. However, the market has continued to resist responding to these cuts in the way OPEC+ might have hoped.
The strategy behind production cuts has traditionally been to allow demand to absorb any surplus oil, leading to higher prices, after which the withheld supply is reintroduced. Historically, this approach has been effective. However, this time it has not had the expected effect—at least, not yet.
Analysts suggest that the cuts may not be working this time due to unrealistic optimistic expectations about Chinese demand growth. This has contributed to a dominant bearish sentiment among oil traders. While some analysts argue that oil prices are underpriced and predict a market correction, they remain outnumbered by voices echoing pessimism about future demand.
Recently, the latest developments in cryptocurrency markets have highlighted some notable trends. Some of them include:
Surge in South Korean Retail Trading: Retail trading volumes for cryptocurrencies in South Korea have surged to $18 billion in the last 24 hours, outpacing the entire country’s stock market by 22%. This spike in activity is attributed to local traders’ fervour over ‘high momentum’ altcoins, particularly Ripple’s XRP, which saw over $6.3 billion in volume. Other popular altcoins among South Korean traders include Dogecoin (DOGE), Stellar (XLM), Ethereum Name Service (ENS), and Hedera (HBAR).
Bitcoin Movement by US Government: The U.S. government moved over $1.9 billion worth of Bitcoin (19,800 BTC) from the Silk Road marketplace to a Coinbase Prime wallet, following a 2021 investigation into James Zhong, convicted of wire fraud. The movement raises questions about potential sell-offs, though it remains uncertain if this will affect the market in the short term or does the US Government plan to day-trade the momentum come the presidential inauguration next month.
Bitcoin’s Struggle to Surpass $98,000: Bitcoin has faced difficulty breaking through the $100,000 psychological barrier, despite experiencing a 38% monthly gain from November 25 to December 2. There is ongoing concern that extended consolidation below $100,000 may lead to bearish strategies suppressing the price. However, derivatives markets show resilience, with traders still maintaining bullish positions, as evidenced by a 17% annualised premium for leveraged positions.
Ethereum’s Strong Inflows: Ethereum (ETH) has seen record net inflows of $2.2 billion in 2024, surpassing the previous record set in 2021. This indicates a major shift in sentiment towards ETH, signaling growing confidence in its long-term value. Cryptocurrency investment products have also seen a substantial increase in inflows, with a total of $37 billion in net inflows for the year, setting a new record.
Ripple’s XRP has flipped the stablecoin USDT by at least $8 billion at the time this article was being written and if it keeps this up, who knows where it might go from here? XRP seems to have finally regained its lost glory and taken back its position on the coins list.
All these developments suggest a vibrant, albeit volatile, market where altcoins, Bitcoin, and Ethereum are experiencing varying levels of investor interest and sentiment, influenced by both retail trading activity and larger institutional movements.
