By Myra P. Saefong and William Watts
U.S. benchmark WTI looks to stretch gains into a second straight day
U.S. and global benchmark oil futures seesawed Tuesday between modest losses and gains after climbing in the previous session in reaction to the fall of the Assad regime in Syria and a pledge by China’s politburo to implement easier monetary policy and more fiscal stimulus.
Price moves
— West Texas Intermediate crude CL00 for January delivery CL.1 CLF25 rose 15 cents, or 0.2%, to $68.52 a barrel on the New York Mercantile Exchange after a 1.7% rise Monday.
— February Brent crude BRN00 BRNG25, the global benchmark, was off by 11 cents, or 0.2%, at $72.03 a barrel on ICE Futures Europe.
— January gasoline RBF25 traded up 0.4% at $1.9598 a gallon, while January heating oil HOF25 added 0.2% to $2.1879 a gallon.
— Natural gas for January delivery NGF25 traded at $3.082 per million British thermal units, down 3.1%.
Market drivers
The weekend fall of Bashar al-Assad prompted traders to price in a modest oil-risk premium Monday, but the price moves Tuesday were modest – seesawing between losses and gains.
Syria isn’t a major oil producer, but the fall of the Assad regime and the resulting power vacuum stirred jitters about its implications for Assad’s allies, Iran and Russia, which are major oil producers.
“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,” Carsten Fritsch, commodity strategist at Commerzbank, said in a note. “In contrast to these two countries, Syria is not a significant oil producer, but due to its geographical location in the Middle East it is of great importance for the stability of the region.”
In market commentary Tuesday, however, Samer Hasn, senior market analyst at XS.com, said the Middle East may actually become “less influential” for oil prices with the “potential diminishing of the risk premium around disruptions to crude flows in the region.”
After the fall of the Assad regime, Iran may become “even weaker than before and less able to threaten Israel and economic interests in the region,” he said.
“Syria was the most important corridor to bypass U.S. sanctions and a destination for Iranian oil exports,” said Hasn. “Therefore, this structural shift may make Iran less willing to escalate in the region, which may entail risks to the safety of crude flows, which are now tighter for Iran.”
Some support for oil Monday was also tied to the pledge by China’s politburo on more aggressive stimulus measures. China’s soft economy has been cited as a key factor in crude’s weak 2024 performance, with WTI down more than 5% in the year to date and Brent down nearly 8%, based on most actively traded contracts.
“The Chinese Communist Party’s Politburo meeting revealed a shift toward flexible fiscal and monetary policies aimed at boosting economic growth and industrial activity,” Ahmad Assiri, research strategist at Pepperstone, said in a note.
“This could serve as a catalyst for increased oil demand in the world’s largest crude importer. However, the market remains cautious about the effectiveness and implementation of these policies, and thus, this potential optimism has yet to translate into oil prices,” he wrote.
Meanwhile, Members of the Organization of the Petroleum Exporting Countries were scheduled to hold a meeting via videoconference Tuesday. The OPEC Conference Ministerial Meeting is a twice-yearly gathering during which the group reviews the general affairs of the organization and discusses key internal matters.
“While OPEC will continue to defend oil prices by extending production cuts into next year, I believe the problem lies more on the demand side than the supply side,” said XS.com’s Hasn. “Despite the production cuts, prices are still in a deep decline.”
The meeting comes just five days after OPEC and its allies, together known as OPEC+, decided to delay the implementation of a planned unwind of around 2.2 million barrels a day of oil production to April from January.
-Myra P. Saefong -William Watts
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12-10-24 1033ET
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