Oil prices edged up on Monday, buoyed by encouraging economic indicators from China, the world’s largest oil importer. Market attention is now shifting to the forthcoming OPEC+ meeting for further guidance on supply levels.
Additionally, some bargain hunting contributed to the rise in crude prices, following substantial losses the previous week amid signs of reduced tensions in the Middle East. However, a recent ceasefire between Israel and Lebanon has shown signs of strain, as both sides have accused each other of ceasefire violations. Furthermore, oil prices retain some risk premium due to escalating tensions between Russia and Ukraine.
Brent crude futures for February increased by 0.3 percent to $72.02 a barrel, while West Texas Intermediate crude futures also rose by 0.3 percent to $67.92 a barrel by 20:16 ET (01:16 GMT).
Improvement in China’s manufacturing activity
Recent Purchasing Managers’ Index (PMI) data from China indicated a further uptick in manufacturing activity during November. Both governmental and private reports corroborated this trend, which follows a series of aggressive stimulus measures implemented by Beijing since late September.
This data has fueled optimism that economic activity in China will strengthen in the upcoming months, supported by ongoing governmental backing. In December, attention will be on two significant political meetings in China that are anticipated to provide additional insights into future stimulus measures.
However, optimism regarding China was somewhat dampened by threats of increased tariffs from U.S. President-elect Donald Trump. These threats have also bolstered the dollar, which has constrained overall gains in crude.
Anticipation for OPEC+ meeting
This week’s focus also includes a meeting of the Organization of the Petroleum Exporting Countries and its allies, including Russia (OPEC+), scheduled for Thursday. The meeting was postponed by four days.
The cartel is expected to delay plans to increase production further due to ongoing weaknesses in oil prices and concerns about sluggish demand in the coming year. OPEC+ has consistently revised its demand forecasts for 2024 and 2025 downward, a trend mirrored by other energy market organizations, including the International Energy Agency.
Oil prices experienced a slight decline on Friday and appeared set for a weekly drop, influenced by expectations of lowered tensions in the Middle East, with attention now directed towards the impending OPEC+ gathering. Crude faced pressure after the announcement of a ceasefire between Israel and Lebanon, although the sustainability of this truce remains uncertain.
Increased tensions between Russia and Ukraine, following damaging strikes on Kyiv, provided some support for crude prices. However, trading volumes were generally low due to the U.S. Thanksgiving holiday. Brent crude futures for January dipped by 0.1 percent to $73.21 per barrel, while West Texas Intermediate (WTI) crude futures stabilized at $69.10 per barrel as of 21:19 ET (02:19 GMT).
Inventory data and market response
Last Thursday, oil prices remained largely unchanged after U.S. inventory data presented a mixed outlook on supplies, while easing tensions in the Middle East contributed to a decrease in oil’s risk premium. Crude prices faced downward pressure this week following the ceasefire between Israel and Lebanon, although Israel has continued its military actions in Gaza, complicating prospects for regional stability.
A weaker dollar helped cushion overall losses in oil prices, while ongoing tensions between Russia and Ukraine kept certain risk factors alive. By 20:31 ET (01:31 GMT), January Brent oil futures had slightly decreased by 0.1 percent to $72.78 per barrel, while WTI crude futures held steady at $68.33 per barrel.
Government data released last Wednesday indicated a decline in U.S. oil inventories by 1.8 million barrels for the week ending November 22. In contrast, gasoline inventories rose by 3.3 million barrels, marking the second consecutive week of significant increases, alongside a rise in distillate stocks. These inventory builds have raised concerns about potential demand slowdowns in the U.S., the world’s largest fuel consumer, particularly as winter approaches—a period typically associated with reduced travel.
Cautious outlook for 2025 supply
The oil market remains cautious about a possible global supply surplus in 2025, primarily driven by record production levels in the U.S. Nevertheless, the dollar’s weakness has helped limit more significant losses in crude, especially as traders maintain expectations for a 25 basis point interest rate cut from the Federal Reserve in December.
On Wednesday, oil prices experienced a slight decline, extending their recent losses as the ceasefire agreement between Israel and Lebanon reduced the perceived risk premium for crude. However, losses were moderated by industry data indicating an unexpected and substantial decrease in U.S. oil inventories, which fueled speculation about tighter supply conditions.
By 20:47 ET (01:47 GMT), January Brent oil futures had decreased by 0.2 percent to $72.70 per barrel, while WTI crude futures also fell by 0.2 percent to $68.30 per barrel. The decline in oil prices was further mitigated by a Reuters report suggesting that OPEC+ was considering delaying its plans to increase production.
