Oil prices experienced a significant pullback on Tuesday, reaching their lowest levels in a week, driven by concerns over global demand. The downward pressure was amplified by disappointing economic data from Germany and China, two major players in the global economy.
Brent crude futures dropped to $73.32 per barrel, while West Texas Intermediate (WTI) crude settled at $70.27. This marked the lowest close for Brent since December 10th.
The slide in oil prices was largely fueled by weak data from China. Industrial output in November barely grew, and retail sales missed expectations, prompting calls for additional government stimulus. Meanwhile, the possibility of further US trade tariffs under Trump’s second administration added to concerns over the health of the Chinese economy and its oil demand.
In Europe, a survey by the Ifo Institute revealed a sharper-than-expected fall in German business sentiment in December. Companies expressed growing pessimism about the outlook, citing geopolitical instability and a slowdown in industrial activity in Germany, Europe’s largest economy.
On the supply side, Kazakhstan reduced its 2024 oil production forecast, lowering its output estimate to 87.8 million metric tons (roughly 1.76 million barrels per day), down from a previous forecast of over 88 million tons. This adjustment highlighted the volatility in supply predictions that continue to shape market dynamics.
Earlier in the week, oil prices had retreated from multi-week highs due to a combination of factors. Concerns over China’s weakened consumer spending and investor caution ahead of the Federal Reserve’s interest rate decision weighed heavily on market sentiment. On Monday, Brent crude closed at $73.91 per barrel, while WTI settled at $70.71.
Despite these declines, oil prices had previously experienced some gains, driven by expectations of a tighter market resulting from potential sanctions on key crude producers like Russia and Iran. There was also optimism about interest rate cuts in the US and Europe. However, China’s slower-than-expected retail sales coupled with the uncertainty surrounding US tariffs quickly eroded this optimism.
In response to the uncertain demand outlook, OPEC+ chose to postpone any plans to increase output until April. As investors await US oil inventory reports later this week, the market remains in a cautious holding pattern, looking for clearer signals on global supply and demand.
Meanwhile, the International Energy Agency (IEA) released its December oil market report, projecting an acceleration in global oil demand growth in 2025. The IEA revised its forecast to an increase of 1.1 million barrels per day (bpd), up from its previous estimate of 990,000 bpd, largely due to stimulus measures in China. However, the IEA also warned of a potential oil surplus in the coming year, as non-OPEC+ producers—such as Argentina, Brazil, Canada, and the US—are expected to boost supply by around 1.5 million bpd.
As OPEC+ seeks to balance the market, reports suggest that the UAE plans to reduce oil shipments in early 2025. At the same time, sanctions on Iran have resulted in a surge in its crude exports to China, as logistical disruptions and higher shipping costs from US sanctions continue to drive up prices for Iranian oil.
Finally, recent data from the US Commodity Futures Trading Commission (CFTC) showed that money managers trimmed their net long positions in US crude futures and options in early December. This move reflects a more cautious outlook among investors, despite some positive developments on the supply side.
In a market shaped by geopolitical uncertainties, economic challenges, and fluctuating supply expectations, oil prices remain highly sensitive to shifts in both demand forecasts and production strategies.
A bill seeking to prohibit the use of foreign currency in Nigeria, which has passed its first reading in the Senate this week, is indeed an intriguing development with significant economic implications. If the bill is passed into law, it would compel Nigerians to use the local currency, the Naira, for all transactions, including salaries and other financial exchanges. This move could theoretically strengthen the Naira by reducing reliance on foreign currencies, such as the US Dollar, and stabilising the local economy.
However, this legislation carries potential risks. A primary concern is the potential for abuse by commercial banks or other financial institutions, which could exploit loopholes and compromise the law’s effectiveness. For example, if these institutions find ways to bypass the restrictions or impose unfair charges, it could lead to unintended consequences, including increased demand for cryptocurrencies.
In such a scenario, Nigerians may turn to alternative currencies like Bitcoin or USDT (Tether) to protect their wealth or facilitate transactions outside the formal banking system. As a result, the ‘Invisible Hand’—a term referring to the self-regulating nature of the market—might drive a greater capital inflow into cryptocurrencies. This could cause a rise in the peer-to-peer (P2P) market value of stablecoins like USDT, which currently hovers around ₦1,620 to ₦1,660. The increased use of cryptocurrencies could further erode the influence of the Naira and complicate efforts to stabilise the economy.
While the bill’s intentions may be positive for the Naira in theory, its success will depend on careful implementation, regulation, and the ability to prevent alternative channels (such as cryptocurrency) from circumventing the law. If the financial ecosystem responds with significant demand for digital currencies, it could lead to an unintended shift toward the crypto market, further complicating Nigeria’s financial landscape.
Ethereum (ETH) has been experiencing a strong bullish trend, with its price reaching new heights recently. On December 16, ETH surged to a year-to-date high of $4,108, and its current price of $3,845.87 (as of the time of writing) shows a notable 8% gain over the past week. Over the past 30 days, ETH has gained an impressive 28%, and it has risen by a substantial 82% over the last year. This significant growth suggests that Ethereum is not only maintaining strong performance but is also poised to challenge its all-time high, which was around $4,878 in November 2021.
Following this price increase is a substantial boost in trading volume. On December 17, the daily trading volume for ETH increased by 30%, reaching $42 billion, a sign that the current rally has momentum and investor confidence is growing. Increased trading volume typically indicates heightened interest and participation in the market, which can sustain upward price movement.
Ethereum’s performance can be attributed to several factors, including improvements in the network, such as the continued development of Ethereum 2.0 and increased institutional interest in decentralised finance (DeFi) and smart contracts. Additionally, the broader cryptocurrency market’s positive sentiment and growing interest in blockchain technology are likely to contribute to ETH’s price surge.
If this trend continues, ETH is well-positioned to challenge and potentially surpass its all-time high in the coming days or weeks, depending on broader market conditions and continued investor enthusiasm. However, as with any volatile asset, investors should remain cautious of potential market corrections.
Bitcoin recently reached a new milestone, scaling $108,000 for the first time. After briefly hitting $108,315 on Tuesday, it experienced a slight pullback, falling to $106,400. This surge occurred amid expectations of a potential interest rate cut by the Federal Reserve, along with a boost in market sentiment driven by President-elect Donald Trump’s favourable stance on cryptocurrencies.
Traders are closely monitoring these factors, with hopes that a rate cut from the Fed could make risk assets like Bitcoin more appealing. At the same time, Trump’s support for the crypto market is adding to the optimism, further driving the price action. However, the market appears to be taking a breather after this rapid rise, possibly reflecting caution as traders assess the broader economic and political environment.
European lawmaker, Sarah Knafo, recently made waves with her bold stance on cryptocurrency, advocating for the European Union (EU) to establish a strategic Bitcoin (BTC) reserve while rejecting the proposed adoption of the ‘digital euro,’ a Central Bank Digital Currency (CBDC) being developed by the European Central Bank (ECB). In a speech delivered before the European Parliament, Knafo, who is a French magistrate and has been a member of the European Parliament since June, emphasised her pro-Bitcoin position and voiced concerns over the potential dangers of a state-controlled digital currency.
Knafo expressed her belief that it is time to move away from what she referred to as the ‘totalitarian temptations’ of the ECB, which she perceives as an overreach in regulating cryptocurrencies. She argued that rather than embracing the digital euro, the EU should focus on adopting the decentralised nature of Bitcoin, which she sees as a more secure and freedom-respecting alternative to centralised digital currencies.
Her call for a strategic Bitcoin reserve highlights her belief in the value of Bitcoin as a long-term asset for the EU, advocating for the region to hold Bitcoin in its reserves much like countries hold gold or foreign currency reserves. This move, she suggests, would allow the EU to have more control over its financial sovereignty, free from the centralised control of governments and central banks.
In her social media post on X (formerly Twitter), Knafo summed up her position with a simple message: ‘No to the digital euro, yes to a strategic Bitcoin reserve,’ reinforcing her stance against the digital euro and promoting Bitcoin as the future of monetary systems.
This speech adds to the growing debate within European governments regarding the future of digital currencies. While some EU lawmakers and officials support the idea of a CBDC to modernize the financial system, Knafo’s position resonates with those who fear the implications of increased centralisation and loss of financial privacy.
