Brent crude futures rose to $74/bbl at the beginning of December as traders awaited the decision of the OPEC meeting on extending production cuts to address the forecasted oversupply in 2025. However, downside price pressures were exerted on Brent prices to $71/bbl after OPEC’s decision to delay crude production hikes until April 2025 failed to boost the investor sentiment surrounding weakening global demand growth. By mid-month, Brent crude futures gained ground to $74.5/bbl, supported by supply-side risks as reports suggested that the U.S. may impose further sanctions on Russian and Iranian exports, which would tighten global crude supplies. On the demand-side, some optimism of demand growth was reignited after reports suggested the Chinese government may implement looser monetary policy in 2025. However, weakening demand growth for crude was subsequently reiterated after Chinese retail sales data revealed a 3.3% growth rate in the previous month, falling short of market projections of a 4.6% rise. Furthermore, Sinopec, China’s largest refiner, forecasted that Chinese oil demand may peak in 2027, heightening concerns of the longevity of weakening demand growth. By month-end, concerns about a supply surplus in 2025 remained significant, although an improved demand sentiment due to indications of a strong U.S. economy led Brent crude to close the month around $74.0/bbl.

Sterling (GBP) traded at $1.263 against USD at the onset of December following a rise in the U.S. Dollar Price Index as the incoming U.S. president, Donald Trump, vowed to protect the dollar against BRICS member countries through the implementation of tariffs. GBP recouped some losses during the first week of December to $1.279 against USD as the markets projected that the Bank of England would maintain interest rates at 4.75% in December, whereas the U.S. Federal Reserve would cut interest rates by 25-basis points. Mixed market sentiment underpinned Sterling during mid-December as UK economic data revealed that GDP declined by 0.1% in October, signalling a weakening economy which eased GBP to $1.264 against USD. On the other hand, the UK Office for National Statistics (ONS) reported that pay growth increased by 5.2% during the third quarter of 2024, exceeding market expectations, which boosted GBP to $1.271 against USD. However, the pound depreciated to seven-month lows at $1.25 against the dollar during the latter half of December after the Bank of England signalled a more relaxed stance on rates during the upcoming year, despite leaving rates unchanged. The U.S. Federal Reserve, however, indicated a hawkish approach the rate cutting in 2025, attracting investors. This resulted in a rise of the U.S. Dollar Price Index to the highest level in over two years, strengthening the dollar against other currencies. At the end of the month, revised data revealed that the UK’s GDP flatlined in Q3, and GBP closed December at $1.253 against USD.

Instability in the Middle East persisted during December after rebels seized the capital of Syria, Damascus, which led to the fleeing of Bashar Al- Assad to Moscow after receiving asylum. Although Syria is not a major oil producer, the Assad regime reportedly imported 80,000/bpd of oil from Iran prior to the political upheaval. The establishment of a new government in Syria could potentially cease Syria’s alliance with Iran. Furthermore, reports suggested that strikes were exchanged between Israel and Hezbollah, despite the U.S.-mediated ceasefire agreement which took effect in the previous month. Israel’s military continued its attacks in Gaza, whilst it launched strikes against the Houthis in Yemen. Hostilities between Russia and other global powers also worsened throughout December after reports suggested that the U.S. may impose tighter sanctions on Russian exports, restricting global oil supplies. European states also began demanding stricter proof of insurance in an effort to combat Russia’s increasing use of ageing fleets to circumvent current sanctions, which include a $60/bbl price cap on crude oil. Towards month-end, U.S. President-elect Donald Trump threatened to reassert control over the Panama Canal, after accusing the nation of charging excessive rates to use the Central American passage. The move is a potential indication of how American foreign policy and diplomacy may shift once Trump is inaugurated on the 20^th of January.