Rise in Oil Prices Following Improved Demand from China

SadaNews - Oil prices have risen from their lowest levels in nearly two months thanks to improved demand from China, amid concerns about a surplus supply in the market.

Brent crude rose towards $62 a barrel, while West Texas Intermediate was near $58 in thin trading ahead of the Christmas and New Year holidays. Actual demand for oil and refining activity in China increased in November compared to the same period last year, but other monthly figures indicated weakness in the overall economy.

Oil is on track to record an annual loss, amid expectations of a widening surplus with increased production from the OPEC+ alliance and other producers, despite forecasts of slowed demand growth. Concerns about oversupply are beginning to show in the main crude oil market in the Middle East, although geopolitical uncertainty has led to a slight increase in the risk premium.

Geopolitical Tensions Support Prices

Ukraine continues to target Russian energy facilities, hitting a key refinery and an oil depot over the weekend. The United States has also sent envoys for a new round of talks in an attempt to end the war.

In another context, Iran stated that it seized a foreign tanker in the Gulf of Oman suspected of carrying smuggled fuel, while the United States intercepted a ship off the coast of Venezuela last week, as President Donald Trump escalated pressure on Nicolás Maduro's regime. Trump had pledged to carry out American strikes against drug gangs on the ground.

Sharou Chanana, chief investment strategist at Saxo Markets in Singapore, noted that "the geopolitical premium has not disappeared, but it has temporarily been overshadowed by surplus supply expectations" and added that "geopolitical tensions play a supportive role for prices under more than a sustainable price increase catalyst."