Oil prices experienced a slight decline on Tuesday, reflecting easing concerns over regional instability following the recent political changes in Syria. However, the market found support in China’s commitment to implement policy stimulus, which is expected to bolster demand from the world’s largest crude importer.
Brent crude futures fell by 32 cents, or approximately 0.4%, settling at $71.82 per barrel, while U.S. West Texas Intermediate (WTI) crude futures dropped 37 cents, or 0.5%, to $68.00 at 0458 GMT. Both benchmarks had gained over 1% on Monday.
Market strategist Yeap Jun Rong from IG noted that “tensions in the Middle East appear contained,” allowing traders to price in a reduced risk of significant oil supply disruptions. Following the ousting of Syrian President Bashar al-Assad, efforts are underway to establish a new government and restore order, with the country’s banks and oil sector resuming operations.
While Syria is not a major oil producer, its strategic location and alliances with Russia and Iran mean that regime changes could lead to increased regional instability.
The market is also closely monitoring expectations for a potential rate cut by the U.S. Federal Reserve during its upcoming meeting on December 17-18. Analysts anticipate a 25 basis point reduction, which could further stimulate oil demand in the United States. However, traders are wary of how upcoming inflation data might influence these predictions.
Phillip Nova’s senior market analyst Priyanka Sachdeva commented that “oil markets have been driven more by demand than supply narratives this year,” leading investors to adopt a cautious approach ahead of key policy announcements from the Fed.
Despite the declines, positive sentiment surrounding China’s economy provided some support for oil prices. Reports indicate that China plans to adopt an “appropriately loose” monetary policy next year—the first easing of its stance in 14 years—to stimulate economic growth.
In November, China’s crude oil imports showed a notable increase compared to last year, marking the first annual growth in seven months. This uptick was attributed to lower prices for Middle Eastern supplies and increased stockpiling demand.
As the market navigates these developments, traders remain attentive to how China’s policy changes will impact future crude demand and overall oil market dynamics.
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