By Crude oil prices eased on Tuesday as concerns about escalating tensions in the Middle East subsided.
“Oil prices slipped as regional risks appeared contained, reducing concerns of supply disruptions,” Arslan Ali, derivatives analyst at FXempire said in a report.
Geopolitical concerns eased about the fallout from Syrian President Bashar-al-Assad’s overthrow.
According to Reuters, rebels have been working to form a government in Syria after overthrowing al-Assad.
The country’s banks and oil sector are set to resume work on Tuesday.
Syria is not a big oil producer, but its location in the Middle East, and close ties with Russia and Iran could raise uncertainties.
At the time of writing, the price of West Texas Intermediate crude oil was at $68.08 per barrel, down 0.4% from the previous close.
Brent crude oil on the Intercontinental Exchange was at $71.90 per barrel, also down 0.4%.
But, oil prices seem to have a much-needed floor after the production cuts extensions by the Organization of the Petroleum Exporting Countries and allies last week.
Demand may rise in China
Additionally, the losses in oil prices were limited on Tuesday as China planned to adopt a “moderately loose” monetary policy.
The country is the world’s top importer of oil.
The Asian giant’s decision to adopt such a monetary policy would be the first in more than a decade. If China’s monetary policy is eased, economic activities would increase, spurring a growth in oil demand.
“China’s commitment to ramping up economic stimulus provided support, with expectations of heightened crude demand from the world’s largest importer,” Ali said.
Meanwhile, China’s crude oil imports in November rose compared with the same period last year, data on Tuesday showed.
This marked the first such growth in imports in seven months.
OPEC+ cuts providing floor to oil prices
The Organization of the Petroleum Exporting Countries and allies last week extended their steep voluntary output cuts of 2.2 million barrels per day till the end of March.
The cartel delayed its planned increase in oil production from January as concerns over an oversupplied market weighed on prices.
OPEC+ has also extended its overall output cuts till the end of 2026.
This amounts to 3.65 million barrels a day of cuts, and is separate from the 2.2 million barrels per day of cuts.
“This is helping to put a floor under crude prices, and should continue to do so. Front-month WTI has generally found some support around $66.50 since October, while the low of $65 has held since May 2023,” David Morrison, senior market analyst at Trade Nation, said.
Prices have come under continued downward pressure thanks to plentiful supply, and weakening demand.
China’s economic slowdown following its property crisis must take the blame for the latter, although demand across Asia as a whole is down significantly this year.
Focus on next week’s Fed meeting
Investors will now shift their focus on next week’s US Federal Reserve’s policy meeting.
The Fed is expected to cut interest rates by 25 basis points at its meeting on December 17 and 18.
Traders have priced in a 86.1% probability of the US central bank cutting rates by 25 bps next week, according to the CME FedWatch tool.
The central bank has already cut rates by 75 bps so far this year.
In September, it surprised the market with a super-sized cut of 50 bps, and a 25 bps reduction last month.
Lower interest rates increase liquidity in an economy, and also reduce the borrowing costs for the public and industries.
If rates are cut, oil demand is expected to rise, boosting sentiments for prices.
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