Oil Prices Rise Amid Political Uncertainty in Syria, but Demand Concerns Persist

Crude oil prices began the week with a slight gain, driven by the political upheaval in Syria following the ousting of President Bashar al-Assad by Islamist rebel groups in a blitzkrieg-style offensive that took less than a month to complete. As of the latest market data, Brent crude was trading at $71.54 per barrel, while West Texas Intermediate (WTI) was at $67.63 per barrel.

This price gain came as geopolitical tensions in the Middle East added a layer of uncertainty to the market. Tomomichi Akuta, an analyst at Mitsubishi UFJ Research and Consulting, told Reuters that the situation in Syria provided some support to the market, though he acknowledged that the price gains were tempered by continued concerns over weak demand growth.

Despite the geopolitical factors, the market sentiment remains cautious. Saudi Arabia's decision to reduce oil prices for January deliveries and OPEC+'s extension of production cuts last week highlighted the ongoing concerns about demand from China. According to Akuta, this suggests that oil prices may soften as the year comes to a close.

Market analysts also believe that while tensions in Syria are causing market jitters, the risk of a major oil supply disruption remains low. IG market strategist Yeap Jun Rong noted that the market is largely pricing in the belief that the political unrest in Syria will remain confined within the country's borders.

However, analysts are divided on the outlook for oil demand. While some predict an oversupply in 2025, others caution that demand may be underestimated. Morgan Stanley, for instance, raised its Brent crude price forecast for 2025, citing the OPEC+ decision to delay the reversal of production cuts. This move, according to the bank, would result in a smaller-than-expected supply surplus, even with the anticipated weakening demand from China.

Despite this, ING analysts noted that the slower return of barrels from OPEC+ will not be sufficient to push the market into a deficit next year. As a result, the oil market remains in a delicate balance, with geopolitical uncertainties and demand forecasts likely to shape the trajectory of prices moving forward.