Oil Prices Gain on Strong China Data and Middle East Tensions

Oil prices advanced on Monday, driven by optimism over robust factory activity in China and renewed geopolitical tensions in the Middle East. However, concerns over potential oversupply in 2025 continued to cap gains.

Market Movement

• Brent crude: Rose 57 cents (0.79%) to $72.41 per barrel by 0700 GMT.
• West Texas Intermediate (WTI): Gained 58 cents (0.85%) to $68.58 per barrel.

The uptick follows a week where both benchmarks saw declines of over 3% due to easing fears over Middle East supply disruptions and forecasts of future surpluses.

Key Drivers

1. China’s Factory Activity Supports Demand Outlook
   A private survey showed that China’s manufacturing activity grew at its fastest pace in five months during November, lifting hopes for stable oil demand from the world’s second-largest consumer. The growth coincides with a boost in optimism among Chinese firms, despite the looming uncertainty of heightened trade threats from U.S. President-elect Donald Trump.
2. Middle East Geopolitical Risks Resurface
   • Israel resumed strikes on Lebanon, injuring several people, as reported by Lebanon’s health ministry.
   • Airstrikes in Syria intensified, with President Bashar al-Assad vowing to quell insurgent advances in Aleppo.
   • The ceasefire between Israel and Lebanon, agreed upon last week, appears fragile, as both sides accused each other of violations.

These developments reignited concerns over potential disruptions in Middle East oil supplies, providing near-term support to prices.

3. OPEC+ Policy Uncertainty
   OPEC+ postponed its policy meeting to December 5, where it is expected to discuss delaying a planned production hike scheduled for January 2025. While the market anticipates a delay, traders are focusing on the extent of the postponement to gauge its impact on prices.
4. Long-Term Supply and Price Outlook
   • The International Energy Agency (IEA) recently forecasted a surplus of over 1 million barrels per day in 2025, weighing on longer-term price expectations.
   • Analysts polled by Reuters now project Brent to average $74.53 per barrel in 2025, marking the seventh consecutive downward revision.

While strong Chinese factory data and Middle East tensions provided short-term support, lingering concerns over ample global supplies and economic weakness in China continue to overshadow the market.

OPEC+’s decision in the upcoming meeting will be pivotal in setting the tone for early 2025. However, with Brent averaging $80 per barrel so far in 2024, the current trend suggests a cautious and uncertain trajectory for oil prices in the near term.