Oil Prices Rise on China Stimulus and European Supply Concerns
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Oil prices edged higher on Tuesday, driven by expectations of increased demand in China and potential supply tightness in Europe during the upcoming winter, reports Reuters. The benchmarks saw a modest increase, with Brent crude settling at $72.19 a barrel and US West Texas Intermediate at $68.59 a barrel. Both had risen by over 1% the previous day.
The price increase was supported by reports suggesting China will adopt a more accommodative monetary policy in 2025 to boost economic growth. This would mark the first easing of monetary policy in 14 years, although details remain limited. Chinese crude oil imports also saw their first annual increase in seven months, rising in November compared to the same period last year.
However, this increase in imports may be due to stockpiling rather than genuine demand growth.
"The increase, however, 'was more a function of stockpiling than demand improvement'," said Tamas Varga of oil broker PVM, to Reuters. "The economy will only be stimulated by improving consumer sentiment and spending, by a rise in domestic aggregate demand echoed in a healthy increase in consumer inflation," Varga added.
Anticipation of increased winter demand also played a role in the price increase. "Hedge funds are starting to buy on tightness of supply in European markets this winter," stated Phil Flynn, senior analyst with Price Futures Group.
The recent developments in Syria, where rebels are working to establish a new government following the ousting of President Bashar al-Assad, appear to have had a limited impact on oil markets.
"The tensions in the Middle East seem contained, which led market participants to price for potentially low risks of a wider regional spillover leading to significant oil supply disruption," noted IG market strategist Yeap Jun Rong.
While Syria is not a major oil producer, its strategic location and past ties with Russia and Iran have raised concerns about potential regional instability.
A potential rate cut by the US Federal Reserve could further boost oil demand, although uncertainty remains as traders await this week's inflation data.