Oil prices rose on Wednesday as investors hoped for a recovery in demand from China after Beijing announced to adoption a loose monetary policy to boost its economy. Heightened geopolitical tensions also raised concerns over supply of oil from the Middle East. China is the world’s largest importer of crude oil, and more expansive monetary policy could boost economic growth in the country.This would lead to higher demand for commodities such as crude oil. At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was $68.81 per barrel, up 0.3%.Brent crude oil on the Intercontinental Exchange was also 0.3% higher at $72.42 per barrel. At the start of the week, oil prices rose sharply after Syrian President Bashar-al-Assad’s regime was overthrown by rebels. “A higher risk premium on the oil price is therefore justified,” Carsten Fritsch, commodity analyst at Commerzbank AG, said in a report.
China’s Politburo signals more supportChina’s Politburo, the body which consists of 24 senior politicians in the Communist Party met on Monday and decided that the monetary policy should tend to become more expansive. China has been struggling with its economy for most of the year.This weighed on crude oil demand and imports. However, recent data indicated that oil imports have risen in November, which boosted sentiments in the oil market. According to the Chinese customs authority, imports amounted to 48.5 million tons or 11.8 million barrels per day.This was a good 14% up on the previous year and the highest volume in a month since August 2023. Additionally, for the first time since April, imports during last month were higher than in the corresponding period a year ago. Fritsch added:
However, it is doubtful that this is a sign of stronger domestic demand.
Rather, refineries are likely to have used the low price level in November to build up stocks.
Geopolitical tensions dominate sentiments
Meanwhile, heightened tensions in the Middle East brought back some of the risk premium on oil prices. After Syria’s President al-Assad was ousted, there is uncertainty about who will fill the resulting power vacuum. “This obviously also brings back memories of the fall of the long-term rulers in Iraq in 2003 and Libya in 2011, whereupon both countries plunged into chaos,” Commerzbank’s Fritsch said. Though these two countries are not major oil producers, their location in the Middle East is of great importance to the region’s stability, according to Fritch.
On a positive note, Iran could lose influence in the region due to the loss of its ally Assad.
Reports also claimed that Israel launched airstrikes across Syria and deployed troops beyond a demilitarised buffer zone for the first time in 50 years over the weekend.
Saudi Arabia lowers selling prices for oil exports in JanuaryAccording to Commerzbank, Saudi Arabia lowered its crude oil official selling prices for customers in Asia to a four-year low in January. This is a significant drop compared to $1.70 in December and the lowest since January 2021, the German bank said. The price for customers in Europe was also lowered sharply due to weak economic activities. Prices for the US were kept unchanged as demand in the regions remained robust. More By This Author:Gold Hits Near 1-Month High On Safe-Haven Demand; Momentum Favours Bulls Oil Prices Slip As Syria Tensions Ease, But OPEC+ Cuts Keep Support In Place USD/CAD Forex: Rising Triangle Forms Ahead Of BoC Decision
