OIL FUTURES: Crude rises as unstable geopolitics adds to upside risks

Crude oil futures were higher in the mid-afternoon Asian trade Dec. 2 as simmering geopolitical tensions and US tariff threats against BRICS contribute to a highly-strung market.

At 3:12 pm Singapore time (0712 GMT), the ICE February Brent futures contract was up 59 cents/b (0.82%) from the previous close at $72.43/b, while the NYMEX January light sweet crude contract rose 58 cents/b (0.85%) at $68.58/b.

"Tensions in the Middle East remain high, while attacks on energy infrastructure in the Russia-Ukraine war are rising," ANZ Research analysts Daniel Hynes and Soni Kumari said.

US president-elect, Donald Trump's latest threat to impose a 100% tariff on BRICS nations should the bloc create an alternative currency was also likely to stir mixed reactions, analysts said.

Upside risks to crude oil futures following geopolitical instability may be capped.

While the threat of tariffs currently remains uncertain, its mention may prompt immediate upside reaction in the US dollar, IG's Market Strategist Yeap Jun Rong said.

The ICE US Dollar Index was at 106.260 as of 0630 GMT Aug. 5, up 0.41% from the previous close. A stronger dollar results in dollar-denominated assets like oil futures becoming more expensive to investors holding foreign currencies, thus dampening demand for these assets.

Still, crude oil futures experienced bullish runs as optimism arose from the East.

"We see total demand growth at 1.3 million b/d in 2025, driven by a broader improvement across Asia and developed economies," ANZ Research's Hynes and Kumari said.

Moreover, China's Purchasing Managers' Index rose to 50.3 in November from 50.1 the previous month, marking a seven month high, latest data from the National Bureau of Statistics showed.

"The breakdown showed encouraging signs for domestic activity with an uptick in both production and new orders. New export orders also saw a smaller contraction on the month but employment worsened slightly. The official manufacturing PMI has now accelerated for three straight months," ING market analysts, Deepali Bhargava, Min Joo Kang, and Lynn Song said.

On the supply side, ANZ Research market analysts anticipate another delay in OPEC+ production hikes so the cartel could buy time and evaluate trade and foreign policies from the Trump administration to come.

"But that is unlikely to distract it from eventually unwinding the voluntary cuts. We maintain our short-term (0-3 months) price target of $65/b. However, the prospect of more supply from OPEC should limit the upside for crude oil prices in 2025, despite improving fundamentals," Hynes and Kumari from ANZ Research added.

The market's focus is turned to OPEC+'s upcoming meeting on Dec. 5.

"Looking ahead, all eyes will be on the November non-farm payrolls jobs report and upcoming speeches from Federal Reserve (Fed) officials, including Chair Powell, as investors brace for potential market-moving insights," IG market analysts said.

Dubai crude

Dubai crude swaps and intermonth spreads were lower in mid-afternoon Asian trading Dec. 2 from the previous close.

The February Dubai swap was pegged at $70.95/b at 2:00 pm Singapore time (0600 GMT), down by 44 cents/b (0.62%) from the previous Asia market close.

The January-February Dubai swap intermonth spread was pegged at 41 cents/b, narrower by 3 cents/b over the same period, and the February-March Dubai swap intermonth spread was pegged at 25 cents/b, unchanged over the same period.

The February Brent-Dubai exchange of futures for swaps was pegged at $1.30/b, narrower by 10 cents/b over the same period.