Oil prices saw a slight increase in early Asian trading on Monday following the fall of Syrian President Bashar al-Assad, which has introduced heightened political uncertainty in the Middle East.

However, these gains were tempered by concerns about weakening global demand for oil in the upcoming year, according to reports from Reuters.

Brent crude futures, the European benchmark, rose by 36 cents, or 0.51%, to $71.48 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude increased by 38 cents, or 0.57%, reaching $67.58 per barrel.

Political Uncertainty in Syria Drives Initial Price Surge

The surge in oil prices follows an announcement on Sunday by Syrian rebels, who claimed on state television that they had successfully overthrown President Assad, ending more than five decades of rule by his family.

This sudden political shift in Syria, a country strategically located in the heart of the Middle East, has added an additional layer of instability to a region already plagued by conflicts.

“This development in Syria has added a new layer of political uncertainty in the Middle East, providing some support for prices,” said Tomomichi Akuta, a senior economist at Mitsubishi UFJ Research and Consulting.

Oil markets are sensitive to political developments in the region due to the potential for disruptions to oil supply, making any significant shifts in political power a catalyst for price fluctuations.

Weak Demand Prospects Limit Price Gains

While the initial market response was a surge in oil prices, this was quickly offset by concerns about diminishing oil demand.

According to analysts, the weakening outlook for global demand, particularly in key markets such as China, has capped further increases in oil prices.

Saudi Aramco, the world’s largest oil exporter, recently lowered its January 2025 prices for Asian buyers, bringing them to their lowest levels since early 2021.

This move is seen as a direct response to sluggish demand from China, which remains the world’s largest importer of oil. Analysts have warned that the economic slowdown in China could significantly affect global oil consumption in the coming months.

OPEC+ Adjustments and Production Plans

Meanwhile, OPEC and its allies, collectively known as OPEC+, have made significant adjustments to their production strategies.

The group recently announced that they will postpone the start of increased oil production by three months, now set to begin in April 2025. This delay reflects the ongoing concern about weak demand and market conditions.

In addition to this, OPEC+ has extended its commitment to fully reversing production cuts by one year, with the new timeline set to conclude at the end of 2026.

These changes underscore the oil cartel’s cautious approach in responding to global market conditions, as it seeks to balance the supply and demand dynamics in a period of economic uncertainty.

Outlook for Oil Prices

Looking ahead, oil prices are expected to remain volatile as markets adjust to geopolitical developments in the Middle East, economic conditions in major oil-consuming countries, and OPEC+’s production strategies.

While the uncertainty surrounding the political situation in Syria offers short-term support for oil prices, weakening demand prospects are likely to continue exerting downward pressure in the long run.