China is more relevant to crude oil prices than the fall of Bashar Al-Assad's regime, TDS’ Senior Commodity Strategist Daniel Ghali notes.
Energy supply risks are not rising
“The Levant is not an oil producing region, limiting the implications for energy prices in the near-term despite a significant reshuffle of the geopolitical order in the Middle East. In fact we think geopolitical risks in the MidEast are at their highest levels since at least the Gulf War. Considering Iran's Axis of Resistance has been notably reduced over the past months, longer-term implications for the nation's nuclear policy and its impact on regional stability should not be understated.”
“Still, our return decomposition framework suggests that energy supply risks are not rising, in line with the limited implications for oil supplies resulting from Syrian regime change. Instead, broad commodity demand expectations are rising notably.”
“This reflects the Chinese Politburo meeting's strongest signals since the Global Financial Crisis, having changed policy language from signaling a ‘prudent’ monetary policy apparoch since 2011 to a ‘moderately loose’ policy for the first time since the GFC. Language on fiscal policy also progressed from a ‘proactive’ approach to a ‘more proactive’ one, underscoring the notion that China's "whatever it takes" moment may have stuck the landing.”
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