Oil prices rose on Monday after the fall of Syrian President Bashar al-Assad’s regime which introduced greater uncertainty to the Middle East. However, gains were limited due to the slowing demand outlook for the coming year.
Brent crude futures for February delivery gained 0.51 percent to $71.48 a barrel, while West Texas Intermediate (WTI) crude futures rose 0.55 percent, settling at $67.57 a barrel by 6:48 GMT.
Middle East uncertainty
Al-Assad’s fall in Syria raised fears of a new wave of instability in a region already battling war and instability, while the worsening Russia-Ukraine war kept the geopolitical risk premium in play and acted as a tailwind for oil prices.
However, Saudi Arabia’s price reductions and OPEC+’s output cut extension last week signaled weaker demand from China, indicating that the market may soften further this year.
Investors are also watching for signs of any impact on the markets from U.S. President-elect Donald Trump’s expected energy and Middle East policies. Signs of U.S. economic resilience and hopes that Trump’s expansionary policies will likely boost fuel demand, offering additional support to oil prices.
OPEC+ postpones output cuts
Saudi Aramco, the world’s biggest crude oil exporter, has reduced its January 2025 prices for Asian buyers to the lowest level since early 2021 as weak demand from top importer China weighs on the market. On Thursday, the Organization of the Petroleum Exporting Countries and its allies postponed the reversal of output cuts by three months until April and extended the full unwinding of production cuts by a year until the end of 2026.
OPEC+ is responsible for about half of the world’s oil output. The group was planning to start unwinding cuts from October 2024 but a slowdown in global demand and rising output elsewhere have forced it to delay the plan several times.
The number of oil and gas rigs deployed in the U.S. last week also hit the highest since mid-September, according to a Baker Hughes report. This pointed to rising output from the world’s biggest crude producer and might further contribute to capping gains in oil prices. With a supply surplus expected next year, both futures saw losses for the past two weeks.
Read: Gold prices rise as China central bank resumes gold purchases
Fed’s rate cut
Investors are looking forward to key economic releases this week including the U.S. inflation report on Wednesday which will provide more clues about the Federal Reserve’s outlook on interest rates. However, analysts noted that additional Fed rate cuts are unlikely to ease oil market concerns about weakening global economic growth and its impact on demand.
In addition, Beijing will host a conference this week where policymakers are set to place plans for the country’s economy in 2025. China’s consumer inflation hit a five-month low in November while factory deflation persisted, data showed on Monday, suggesting that efforts to support the faltering economic demand are having limited impact.
