Oil prices remain under pressure despite geopolitical risk
Oil prices remain under pressure despite the recent developments in Syria, with oil market fundamentals countering geopolitical uncertainty.
– Expectations for a weaker dollar in 2025-2026 are being gradually reconsidered as Donald Trump’s re-election and the prospect of stronger-than-expected US economic performance improved the outlook of the greenback.
– Institutional investors have halved their net short dollar positions to just 2 billion in the week to December 3, the least in more than seven years, according to data aggregated by the Commodity Futures Trading Commission.
– The upcoming Federal Reserve meeting might also add to the strength of the US dollar, with St. Louis Fed President Alberto Musalem suggesting that interest-rate cuts could be already paused at the Fed’s December 17-18 meeting.
– The failed presidential takeover in South Korea and the collapse of the French government have concurrently boosted the US dollar’s safe haven appeal, leading to a narrowing in bullish bets on the EU’s euro and the US dollar.
Market Movers
– US shale producer Crescent Energy (NYSE:CRGY) said it would acquire PE-backed Ridgemar Energy’s assets in the Eagle Ford basin of Texas in a cash-and-stock deal valued at $905 million, with the deal expected to close in Q1 2025.
– UK energy major BP (NYSE:BP) is reportedly looking to sell up to 49% of its US pipeline gas business in a bid to generate some $3 billion as the company seeks to reduce its net debt.
– ADNOC, the national oil company of the UAE, has signed a 15-year sales and purchase agreement to provide 1 mtpa of LNG to Malaysia’s Petronas, also a gas producer, with deliveries from Ruwais LNG starting in 2028.
The collapse of the Syrian government prompted the oil markets to look at Middle Eastern geopolitical risks again, but the relatively small volumes directly at risk in Syria means the impact on prices has been limited. ICE Brent continues to linger below $72 per barrel while WTI is trading below $68.59. Low trading liquidity and a lack of tradable fundamental events would most probably steer the markets’ attention to monetary policy, ahead of the US Federal Reserve’s meeting next week.
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