Crude oil surges after China’s policy stance

Today’s headlines

What’s happening: Crude oil settled higher on Monday, following China’s announcement of stimulus plans.

What happened: China announced its first move towards easing its overall monetary policy since 2010.

Syrian President Bashar al-Assad’s sudden fall also lent support to crude oil on Monday.

Why it matters: China’s sluggish economic growth amid a slump in the property market has resulted in weak demand for crude oil this year. Soft demand from China, the world’s second-largest consumer of oil, and an increase in crude output have been among the main reasons for lower crude oil prices in 2024. Markets widely expect an output surplus into the next year.

The Politburo, a decision-making body led by Chinese President Xi Jinping, announced on Monday that the country would adopt “more proactive” fiscal measures as well as a “moderately” looser monetary policy in 2025 to boost domestic consumption and spur economic growth.

Meanwhile, Syrian rebels ousted President Assad, which ended the 50-year rule by his family. After long negotiations with the rebels, President Assad and officials resigned from the government. Assad and his family have sought asylum in Russia. The event could spark further geopolitical tensions, impacting crude supply.

Saudi Aramco on Sunday lowered its January prices for Asia to their weakest level since early 2021.

WTI crude for January delivery gained $1.17, or 1.7%, to close at $68.37 a barrel on the NYMEX (New York Mercantile Exchange). February Brent crude added $1.02, or 1.4%, to settle at $72.14 a barrel on ICE Futures Europe. Both standards of crude oil rose after three straight sessions of declines.

In other energy trading, January gasoline gained 2.4% to $1.95 a gallon, while January heating oil rose 2.4% to $2.18 a gallon and natural gas for January delivery climbed around 3.5% to $3.18 per million British thermal units.

What to watch: Investors await the release of inflation data from the US on Wednesday, which is expected to cement a rate cut by the US Federal Reserve this month. Lower interest rates translate to lower borrowing costs for businesses, which boosts economic activity and oil demand. Analysts expect inflation rate in the US to accelerate to 2.7% year-over-year in November, from 2.6% in the previous month.

Data on crude oil stockpiles, due to be released on Wednesday by the Energy Information Administration, will also remain in focus.

The markets today

European stocks in focus today ahead of the ECB’s interest rate decision this week

Context: European equity markets extended gains and settled higher on Monday, as investors assessed China’s stimulus measures.

Details: The announcement by China’s leaders regarding a “moderately” looser monetary policy is expected to provide a boost to domestic consumption. Expectations of demand from China boosted European luxury stocks higher on Monday. Gucci-owner Kering climbed about 4% during the session.

Shares of BP gained 5% on Monday, after the company announced plans to merge its offshore wind business with Japan’s company JERA. Volkswagen Group’s shares gained more than 1% on Monday despite ongoing strikes at the company.

The STOXX Europe 600 Index rose 0.14% to close at 521.22 on Monday, notching gains for the eighth consecutive session. This made it the index’s longest rally since May.

London’s FTSE 100 gained 0.52% to close at 8,352.08 on Monday, while France’s CAC 40 added 0.72% to 7,480.14. Germany’s DAX 40 bucked the trend, falling 0.19% to settle at 20,345.96 on Monday.

What to watch: Investors await the European Central Bank’s interest rate decision on Thursday. Markets widely expect the central bank to cut its benchmark rate to 3.15% during the meeting. Markets will watch any comments providing insights into the central bank’s policy in 2025, as the region’s economy continues to struggle.

Other Markets: US trading indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.54%, 0.61% and 0.84%, respectively.

The news shaping the markets

Russia said it is open to negotiations on Ukraine, following US President-elect Donald Trump’s comments calling for an “immediate ceasefire” in Kyiv. The news sent the RUB/USD pair slightly lower in forex trading this morning.

Australia’s NAB business confidence index fell to -3 in November, from around a two-year high of 5 in the previous month, exerting pressure on the AUD/USD forex pair.

Singapore’s foreign exchange reserves contracted to S$505.7 billion in November, from S$507.6 billion in the previous month, sending the SGD/USD pair lower in forex trading this morning.

Taiwan’s trade surplus shrank to $7.92 billion in November, from $9.82 billion in the year-ago month, exerting pressure on the TWD/USD forex pair.

Philippines’ trade deficit widened to $5.8 billion in October from $4.2 billion in the year-ago period. The latest deficit being the largest since August 2022 sent the EUR/USD pair lower in forex trading this morning.

What else to watch today

Italy’s industrial production (1300 UAE Time), South Africa’s gold production (1330 UAE Time), mining production (1330 UAE Time) and manufacturing production (1500 UAE Time), US NFIB business optimism index (1500 UAE Time), nonfarm productivity (1730 UAE Time), unit labour costs (1730 UAE Time) and Redbook index (1755 UAE Time), Brazil’s Inflation rate (1600 UAE Time), as well as Mexico’s consumer confidence (1600 UAE Time).