Oil prices saw modest gains on Monday following the sudden fall of Syrian President Bashar al-Assad’s regime, which added a new layer of geopolitical uncertainty to an already volatile Middle East. However, the increase was tempered by concerns over weakening global demand, especially from China, and a forecasted supply surplus in 2025.
Brent Crude futures rose by 0.51%, or 36 cents, reaching $71.48 per barrel by 0723 GMT, while U.S. West Texas Intermediate (WTI) crude futures gained 0.55%, or 37 cents, to $67.57 per barrel.
The dramatic developments in Syria, where rebel forces claimed victory and ousted al-Assad after a rapid offensive, have raised fears of renewed instability in the Middle East. The fall of the Assad regime marks the end of a 50-year political dynasty, further complicating an already volatile region plagued by conflict.
“The sudden change in Syria has added a fresh layer of political risk to the Middle East, which is providing some support to oil prices,” said Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting. “However, concerns over weak demand from China and OPEC+’s recent decision to extend production cuts suggest that market conditions may soften as we approach the end of the year.”
Saudi Aramco, the world’s largest oil exporter, has already responded to the market conditions by reducing its January 2025 prices for Asian buyers to the lowest levels since early 2021. This move underscores ongoing demand weaknesses, particularly from China, which remains a critical driver of global oil consumption.
Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC+), a group of oil-producing nations that collectively account for about half of the world’s oil output, has extended its commitment to production cuts until the end of 2026. Initially, OPEC+ planned to start unwinding these cuts in October 2024, but persistent weakness in global demand—especially from China—has led to multiple delays.
U.S. oil production is also increasing, adding pressure to the global supply-demand balance. The number of oil rigs deployed in the United States hit a high last week not seen since mid-September, indicating higher output from the world’s largest oil producer. With increasing production both in the U.S. and from other non-OPEC countries, global oil markets are bracing for a potential supply surplus next year.
As a result, both Brent and WTI prices have faced downward pressure, with both benchmarks posting losses over the past two consecutive weeks.
Despite these market dynamics, investors remain cautious. The U.S. Commodity Futures Trading Commission (CFTC) reported that money managers have increased their net long positions on U.S. crude futures and options in the week leading up to December 3. However, the overall sentiment remains mixed, with many traders wary of the potential risks posed by geopolitical instability and slowing global economic growth.
The coming week is expected to be pivotal, with investors closely monitoring key economic reports, particularly the U.S. inflation data due on Wednesday. This report could provide additional clues about the Federal Reserve’s next moves regarding interest rates, which are likely to influence the oil market further.
ANZ analysts cautioned that even if the Fed announces additional rate cuts, it may not be enough to counteract the growing concerns about global demand. Economic data from China, the world’s largest oil importer, also suggests that efforts to stimulate its faltering economy are having limited success. The country’s consumer inflation dropped to a five-month low in November, while factory deflation continued, underscoring the challenges facing the global economy.
This week, Beijing will host a significant economic conference where policymakers are expected to outline their strategy for boosting growth in 2025. Given China’s critical role in global oil consumption, the outcomes of these discussions will be closely scrutinized for any signals of policy changes that could impact demand for energy.
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