HG MARKETS:

Oil prices saw a significant increase on Monday, rising by over 1% as China signaled its first move toward loosening monetary policy since 2010 in an effort to revive its slowing economy. According to state media reports, the country’s Politburo which is the principle policy making committee of communist party, indicated a shift towards a “moderately loose” monetary policy, a term last used during the global financial crisis to support recovery. The move comes as China’s economy struggles with stagnating growth, exacerbated by a collapsing property market that has undermined consumer confidence and overall consumption. As a result, Brent crude futures climbed by 94 cents, or 1.32%, to $72.06 per barrel, while U.S. West Texas Intermediate (WTI) crude futures rose by $1, or 1.49%, to $68.20 per barrel. Analysts attribute the rise in oil prices to the easing monetary policy stance in China, which has bolstered investor sentiment and contributed to the rebound in crude prices.

In addition to China’s policy shift, oil prices were supported by heightened geopolitical uncertainty following the fall of Syrian President Bashar al-Assad regime. On Sunday, Syrian rebel group Hayat Tahrir Al-Sham announced on state television that they had ousted Bashar-al- Assad, bringing an abrupt end to the 50-year family dynasty. The swift overthrow raised concerns over further instability in the Middle East, a region already ravaged by conflict. The political developments in Syria added a layer of uncertainty that provided further support to crude prices. Tomomichi Akuta, senior economist at Mitsubishi UFJ Research, noted that this new instability in the region has contributed to a more cautious market outlook, as investors anticipate potential disruptions in supply.

However, despite the immediate support from China’s monetary policy and the political unrest in Syria, the overall market outlook for oil remains cautious. Last week, OPEC+ decided to extend its production cuts, largely in response to the weakening demand from China. Additionally, Saudi Arabia made price reductions for its crude exports to Asia, marking its lowest pricing levels since early 2021. These factors, combined with weak demand signals, suggest that the oil market could soften towards the end of the year. Investors are also bracing for a busy week ahead, including the release of the U.S. inflation report on Wednesday, which will provide more insights into the Federal Reserve’s plans for interest rates and its potential impact on global markets.