Oil prices climbed on Monday, buoyed by geopolitical tensions in the Middle East and signals of potential economic stimulus from China, though gains were tempered by ongoing concerns about weak demand from the world's largest crude importer.
Brent crude futures rose $1, or 1.4%, to $72.12 per barrel by 13:56 GMT, while U.S. West Texas Intermediate (WTI) crude futures climbed $1.09, or 1.6%, to $68.29 per barrel. The market's movements reflect a volatile mix of regional instability and mixed signals from key economic players.
The ousting of Syrian President Bashar al-Assad has introduced fresh uncertainties in an already fragile Middle East. Syrian rebels announced Assad's overthrow on Sunday, marking the end of a 50-year regime. The abrupt political shift raised concerns about broader instability in the region, which has historically influenced oil markets. "The development in Syria has added a new layer of political uncertainty in the Middle East, providing some support to the market," said Tomomichi Akuta, a senior economist at Mitsubishi UFJ Research and Consulting.
At the same time, China, the world's top oil importer, has indicated a potential shift toward a "moderately loose" monetary policy to stimulate its economy. This marked the first use of such language by China since 2010, signaling efforts to counter a slowdown exacerbated by a slump in the property market and dampened consumer confidence.
"The easing of monetary policy stance in China is likely the driver of the oil price rebounding, supporting risk sentiment," said Giovanni Staunovo, an analyst at UBS. However, Tamas Varga of PVM Oil Associates noted that the announcement lacked specifics, emphasizing that sustainable price support depends on tangible improvements in consumer spending and sentiment.
China's slowdown has already prompted OPEC+ to adjust its production strategy. Last week, the group decided to delay plans for higher output until April and extended production cuts until the end of 2026. Saudi Arabia, the leading OPEC member, has further reduced its January 2025 oil prices for Asian buyers to the lowest levels seen since early 2021.
"Saudi Arabia's price reductions and OPEC+'s production cut extension last week underscored weak demand from China, indicating the market may soften toward year-end," Akuta added.
Investors are also closely watching the incoming U.S. administration's potential impact on global oil markets. President-elect Donald Trump's expected energy policies and approach to Middle Eastern dynamics have added another layer of uncertainty. Meanwhile, Saudi Aramco's pricing adjustments and the likelihood of a continued supply surplus in 2025 further weigh on market expectations.
The number of operational oil and gas rigs in the U.S. hit its highest level since mid-September, according to Baker Hughes, pointing to rising output from the world's largest crude producer. This increased production could exert additional pressure on global prices in the coming months.
Key economic data releases this week, including the U.S. inflation report and China's economic policy conference, are likely to shape market sentiment. China's consumer inflation recently hit a five-month low, highlighting the limited impact of Beijing's current stimulus measures.
