December 11, 2024 (Globalinvestorideas.com Newswire) Globalinvestorideas.com, a go-to platform for big investing ideas releases market commentary from Samer Hasn, Senior Market Analyst at XS.com
Crude oil prices continue to rise across the two main benchmarks for a third day in a row, recording a gain of 0.3%.
The gains in crude come as China announces plans to ease monetary policy, which could help boost the economy. This announcement follows an earlier announcement of plans to reform the social system known as “hukou,” which may ultimately support consumer spending primarily in addition to the real estate market.
While experts see supporting domestic spending and investment as key factors to support growth, China’s announced monetary measures have long been criticized as insufficient, as there is no appetite to borrow even under easy conditions, amid uncertainty about the future of the economy and the ability to meet debt payments.
However, the crystallization of the impact of the recent support packages and reforms over the next year, in conjunction with easy monetary conditions, should accelerate the recovery. I believe that this recovery will be a more important driver of growth in crude prices than supply-restriction measures or geopolitical tensions – the problem lies in demand.
Speaking of geopolitics, the impact of the massive and unprecedented Israeli attacks on Syria’s military infrastructure seems to have been exaggerated. This does not represent an escalation of the regional war and will not ultimately damage the region’s crude supplies. If the markets have indeed priced this news in, a correction is not far away – let’s not forget that oil market conditions are not that favourable yet, with positive signs from China continuing to emerge little by little.
These attacks were, as Israel stated, to prevent any strategic weapons from falling into the wrong hands following the structural changes brought about by the fall of the Bashar al-Assad regime in Syria.
Moreover, as I discussed yesterday, this historic change in the Middle East could eventually pave the way for regional de-escalation and thus the risk premium will tend to shrink by time. This shift has left Hezbollah besieged in Lebanon without the Iranian supply that used to come through Syria. This could also put further economic pressure on Iran, as Syria and Lebanon are important corridors for evading US sanctions.
The threat of Iran disrupting crude supplies from US allies in the region remains, as was previously reported this year after the exchange of attacks between Iran and Israel. However, I believe that this is now more unlikely than before, as any eventual supply disruption would also affect Iranian exports.
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