OIL FUTURES: Crude up following further ceasefire violations between Israel and Hezbollah

Crude oil futures were higher during mid-afternoon Asian trade Dec. 3 following further violations of the ceasefire agreement between Israel and Hezbollah.

At 3:33 pm Singapore time (0733 GMT), the ICE February Brent futures contract was up 37 cents/b (0.52%) from the previous close at $72.20/b, while NYMEX January light sweet crude contract was up 30 cents/b (0.44%) from the previous close at $68.40/b.

Further strikes were exchanged between Israel and Hezbollah, piling onto the ceasefire violations that threaten the legitimacy of the previously negotiated truce.

"A short while ago, the [Israeli Air Force] struck Hezbollah terrorists, dozens of launchers, and terrorist infrastructure throughout Lebanon. Additionally, the IAF struck the Hezbollah launcher in the area of Berghoz in southern Lebanon shortly after the launch of the two projectiles toward Mount Dov," the Israel Defense Forces said earlier Dec. 3.

"Hezbollah's launches tonight constitute a violation of the ceasefire agreement between Israel and Lebanon," the IDF continued.

Potentially escalating tensions further, Israel most recently prohibited residents in Lebanon from returning to their homes in the southern region, according to regional media reports.

"I remind you that until further notice, you are prohibited from moving south to the line of the following villages and their surroundings: Shebaa, al-Habbariyeh, Marjayoun, Arnoun, Yohmor, Qantara, Chaqra, Baraachit, Yater, Al-Mansouri... Anyone who moves south of this line – puts himself in danger," said Avichay Adraee, Colonel in the IDF and military spokesperson, on X, formerly known as Twitter.

As an uncertain geopolitical climate continues to dominate headlines, market analysts find limited downside risk in crude oil futures.

"The downside potential should be limited and price rebounds could be expected on hope that OPEC would delay -- or even scrap -- its plans to restore production in early 2025," Ipek Ozkardeskaya, senior analyst at Swissquote Bank said.

Still, a largely bearish demand outlook for 2025 is likely to outweigh the upside risks following OPEC+'s decision for a production hike.

"Therefore, price rallies will continue to offer interesting levels to strengthen medium-term bearish positions," Ozkardeskaya added.

Dubai crude

Dubai crude swaps and intermonth spreads were lower during the mid-afternoon Asian trading Dec. 3 from the previous close.

The February Dubai swap was pegged at $70.75/b at 2:05 pm Singapore time (0605 GMT), down $0.38/b (0.53%) from the previous Asian market close.

The January-February Dubai swap intermonth spread was pegged at 42 cents/b, 3 cents/b narrower over the same period, and the February-March Dubai swap intermonth spread was pegged at 23 cents/b, 3 cents/b narrower over the same period.

The February Brent-Dubai exchange of futures for swaps was pegged at $1.30/b, shrinking 8 cents/b over the same period.