Oil prices fell on Tuesday as concerns over the fallout from Syrian President Bashar al-Assad’s ouster eased. The market backed China’s promise to step up policy stimulus, which could boost demand from global crude buyers.
Brent crude futures fell 32 cents, or about 0.4%, to $71.82 a barrel. WTI crude futures fell 37 cents, or 0.5%, to $68 by 0458 GMT. Both indexes rose more than 1% on Monday.
Tensions in the Middle East appear to be under control, prompting market participants to price in low risk of needing supplies.
Syria is working to establish a government and restore order after Assad’s ouster, and the country’s banks and oil sector are set to resume operations on Tuesday.
Syria itself is not a major oil producer, but it is strategically located, has strong ties to Russia and Iran, and regime change has raised concerns about regional instability.
The transfer of power came after 13 years of civil war and ended more than 50 years of brutal rule by the Assad family.
The market is also focused on the possibility of a Fed rate cut next week, which could boost oil demand in the world’s largest economy.
The Fed is expected to cut interest rates by 25 basis points after its meeting on December 17-18, but investors are waiting to see if this week’s inflation data will derail that outlook.
Oil markets have been driven more by demand than supply narratives this year, and as a result, investors are wary of taking speculative positions in oil ahead of major policy decisions from the Fed.
The declines were capped by positive expectations for China’s economy after reports that it will adopt a more lenient monetary policy next year. This is the first time in nearly 14 years that the world’s largest oil importer has eased its stance to spur economic growth.
While market hopes for aggressive policy stimulus are high, gains in oil prices may be limited until the impact of Beijing’s measures on the country’s crude demand outlook becomes clearer.
In a positive sign, China’s crude imports grew for the first time in November from a year earlier, data showed on Tuesday, as lower prices and demand for stocks in the Middle East boosted purchases.
