Oil prices surged more than 1% on Monday, propelled by heightened geopolitical risks following the reported fall of Syrian President Bashar al-Assad and signals of a potential monetary policy easing in China, the world’s largest oil importer.
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Brent crude futures settled at $72.14 per barrel, marking a $1.02 (1.4%) increase. U.S. West Texas Intermediate crude futures climbed $1.17 (1.7%) to $68.37.
Syrian Instability Fuels Geopolitical Concerns
“Events in Syria over the weekend could impact the crude market and increase the geopolitical risk premium on oil prices in the weeks and months to come amid yet more instability in the Middle East region,” commented Jorge Leon, Rystad Energy’s head of geopolitical analysis.
Syrian rebels declared on state television on Sunday that they had removed Assad from power, potentially ending a 50-year family dynasty. This announcement raises concerns about further destabilization in a region already grappling with conflict.
While Syria is not a significant oil producer, its strategic location and alliances with Russia and Iran give it considerable geopolitical influence. The regime change, coupled with existing tensions in the region, could potentially spill over into neighboring territories, according to Leon. Early indications of market disruption emerged as a tanker transporting Iranian oil to Syria reversed course in the Red Sea, according to ship-tracking data.
China Signals Potential Monetary Policy Easing
Adding to the upward pressure on oil prices, China announced its intention to strengthen “unconventional” counter-cyclical adjustments, prioritizing domestic demand expansion and consumption growth. This information was reported by state media Xinhua, citing a meeting of the Politburo, a top Communist Party committee.
China’s economic growth has recently slowed down, impacted by a downturn in the property market that has dampened consumer confidence and spending. Loosening monetary policy typically involves actions by a central bank or government aimed at stimulating economic growth. These actions can include increasing the money supply, reducing interest rates, and implementing fiscal stimulus measures.
“We see a commodity-price boom if China indeed follows through with the promises of looser monetary policy and the possibility that they will do whatever it takes to stimulate the economy,” stated Phil Flynn, senior analyst at Price Futures Group.
China’s economic slowdown was a key factor in the recent decision by OPEC+, a group of oil-producing nations, to delay planned production increases until April.
Other Market Influences
Counterbalancing these upward pressures, Saudi Aramco, a major oil exporter, lowered its January 2025 prices for Asian buyers to their lowest point since early 2021. This move sparked concerns about potential weakening demand.
Market participants are also awaiting U.S. inflation data expected later this week, which could influence the Federal Reserve’s decision on interest rates at its upcoming December meeting. Lower interest rates generally reduce borrowing costs, potentially stimulating economic activity and oil demand.
In conclusion, the combined forces of escalating geopolitical risks in the Middle East and the prospect of monetary easing in China propelled oil prices higher on Monday. These factors overshadowed concerns about potential weakening demand signaled by Saudi Aramco’s price adjustments. Market attention now turns to upcoming U.S. inflation data and the Federal Reserve’s subsequent interest rate decision.
