Global oil markets experienced heightened instability during the second week of December, with prices initially surging by approximately 2% in response to escalating geopolitical tensions. Reports of potential new sanctions targeting Russia and Iran raised alarms across energy sectors, reviving concerns about constrained global supply. However, the bullish momentum proved short-lived. By week’s end, crude prices retreated as investors grew wary of weakening demand indicators and a strengthening U.S. dollar, which makes oil more expensive for buyers using other currencies.
OPEC+ maintained its cautious stance, opting not to introduce new production cuts but remaining vigilant in the face of fluctuating market signals. The alliance’s resolve to support price stability faces increasing pressure as global consumption trends show signs of fragility. With energy demand softening in major economies, particularly in Asia and Europe, the group’s ability to balance supply efficiently could be tested further in early 2025.
Compounding the uncertainty are monetary policy developments, particularly from the United States. Chicago Federal Reserve President Austan Goolsbee commented on the evolving outlook for U.S. interest rates, projecting that the neutral federal funds rate could settle around 3% by the end of 2025. He also confirmed expectations of a quarter-point rate cut in December, which markets had largely anticipated. While rate cuts typically offer support to commodities by lowering borrowing costs and spurring economic activity, the Fed’s cautious tone signaled that inflation management remains a top priority.
In the United Kingdom, the energy sector faced its own turmoil. A cold snap on December 13 triggered a sharp surge in electricity prices, with rates reaching £215.47 per megawatt-hour. The spike was attributed to increased heating demand coupled with a significant drop in renewable energy output, particularly from wind sources. Despite ongoing investments in clean energy infrastructure, the episode underscored the U.K.’s vulnerability to short-term weather volatility and the importance of maintaining flexible backup systems during extreme conditions.
Together, these developments painted a complex picture of the energy landscape heading into the final stretch of 2024. Market participants are navigating a web of geopolitical risk, macroeconomic shifts, and environmental variability, all of which are poised to shape pricing dynamics and investment strategies in the months to come.
