As tensions in the Middle East increase, demand worries are offset.
The oil prices rose on Monday, as the heightened tensions that followed the rebels' overthrow in Syria of President Bashar al Assad offset concerns about the weak Chinese demand highlighted by Saudi Aramco’s price reductions to Asian buyers.
Brent crude futures increased by 22 cents or 0.3% to $71.34 a barrel at 0140 GMT. U.S. West Texas Intermediate Crude Futures rose 22 cents or 0.3% to $67.42 a barrel.
Brent fell more than 2.5% and WTI dropped 1.2% last week as analysts predicted a surplus of supply next year due to weak demand despite OPEC+'s decision to delay production hikes and extend the deep cuts in production until 2026.
Saudi Aramco has announced that it will reduce its January 2025 crude oil prices for Asian buyers, to their lowest level since the early days of 2021. This is due to weak demand, particularly from China, which is the largest importer.
On Sunday, Syrian rebels announced that they had overthrown President al-Assad. They ended a 50 year family dynasty with a lightning-fast offensive, which sparked fears of a fresh wave of instability across the Middle East, already gripped by conflict.
Tomomichi Akuta is a senior economist with Mitsubishi UFJ Research and Consulting. He said that the development in Syria had added a layer of political insecurity in the Middle East. This has helped to support the market.
He added that the Saudi Arabian price cuts and OPEC+ production cut extension were evidence of weak Chinese demand, indicating a possible softening in the market by year's end. Investors are also closely monitoring the impact Donald Trump, the U.S. president-elect, may have on energy and Middle East policy.
The Organization of the Petroleum Exporting Countries (OPEC+) and its allies, a collective known as OPEC+, pushed the beginning of the oil production rise back by three months to April, and extended the unwinding of the cuts by a full year, until the end of the 2026.
OPEC+, responsible for half the world's crude oil production, had planned to unwind cuts in October 2024. However, a slowdown of global demand, especially from the top crude importer China, and increasing output elsewhere forced them to delay the plan multiple times.
Last week, the number of oil and natural gas rigs in the United States reached its highest level since mid-September. This indicates that the output from the largest crude producer in the world is increasing. (Reporting and editing by Lincoln Feast, Muralikumar Aantharaman and Yuka Obayashi)
(source: Reuters)
