Oil prices fell on Tuesday, amid easing concerns about the consequences of the overthrow of Syrian President Bashar al-Assad. At the same time, the market received support from China’s statements about its intention to step up economic stimulus, which could boost demand from the world’s largest oil importer, Reuters reports.
Key indicators:
- Futures for Brent crude oil fell by $0.32 (0.4%) to $71.82 per barrel.
- US WTI fell by $0.37 (0.5%) to $68 as of 04:58 GMT.
On Monday, both benchmarks rose by more than 1%.
Reduced risks in Syria
Analysts note that the market takes into account the low risks of regional instability spreading, which could lead to significant disruptions in oil supplies.
“Tensions in the Middle East appear to be under control, which is tempering market participants’ fears of possible supply disruptions,” said IG market strategist Yep Jun Rong.
Rebels in Syria have begun to form a government and rebuild the economy after the fall of the Assad regime. The banking sector and oil production are expected to resume operations on Tuesday.
Although Syria is not a significant oil producer, its strategic location and ties to Russia and Iran make it an important regional player. The Assad regime, which had ruled for more than 50 years, was finally overthrown after 13 years of civil war.
Support from China
China’s stimulative economic policy remains a key factor for the market. According to the data announced on Tuesday, China will introduce a “moderately loose” monetary policy next year, the first step towards easing its economic policy in 14 years. This is expected to boost economic growth and, consequently, increase demand for oil.
In November, China’s crude oil imports rose for the first time in seven months, driven by lower prices for supplies from the Middle East and demand for stockpiles.
The impact of US Federal Reserve decisions
Investors are also keeping an eye on a possible cut in the US Federal Reserve’s key policy rate next week. The regulator is expected to cut the rate by 25 basis points, which could boost demand for oil in the world’s largest economy. However, the key factor remains inflation data, which could influence the Fed’s decision.
“The oil market this year is responding to demand dynamics rather than supply, so investors are cautious about speculative positions ahead of important Fed decisions,” said analyst Priyanka Sachdeva.
Despite the general downturn, positive signals from China and the expectation of Fed decisions create conditions for oil prices to stabilise in the near term.
