Oil prices rose by over 1% on Monday after China announced plans to implement its first significant monetary policy easing since 2010 in an effort to boost economic growth. Brent crude for February delivery increased by 1.52%, reaching $72.21 per barrel by 10:00 am ET, while the WTI crude January contract rose 1.80% to $68.41 per barrel.
UBS analyst Giovanni Staunovo suggested that the shift in China’s monetary policy was likely the key factor driving the rebound in oil prices, helping to improve market sentiment.
In a statement following a meeting of top Communist Party officials, Beijing revealed its plan to adopt a “moderately loose” monetary policy. This includes measures such as increasing the money supply, lowering interest rates, and providing fiscal stimulus, all aimed at stimulating economic activity.
Tomomichi Akuta, senior economist at Mitsubishi UFJ Research and Consulting, noted that recent developments in Syria have added a layer of political uncertainty to the Middle East, which has also provided some support to oil prices. However, he cautioned that Saudi Arabia’s price cuts and OPEC+’s decision to extend production cuts last week highlighted weak demand from China, which could lead to a market slowdown by the end of the year.
Last week, OPEC+ announced a delay in its planned output increase, now set for April 2025, and extended the full reversal of production cuts until the end of 2026. The group also made several other key decisions, including extending baseline production targets for all members through 2026. Commodity analysts at Standard Chartered pointed out that the market has not yet fully accounted for the reduction in planned oil output. The bank noted that the original plan, which included voluntary cuts and an increase in the UAE’s output target, would have added 496.3 million barrels to the market in 2025. However, under the new schedules, the market will now see just 191.3 million barrels, resulting in a daily cut of 836,000 barrels throughout the year.
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