Oil prices saw a slight increase on Friday, moving toward a second straight weekly gain as optimism regarding China’s economic recovery boosted market sentiment.Â
As of 20:19 ET (01:19 GMT), Brent Oil Futures climbed by 0.3 percent to $72.68 a barrel, while Crude Oil WTI Futures set to expire in February rose by 0.2 percent to $76.08 a barrel. The previous session had recorded significant gains following data that indicated growth in Chinese manufacturing activity.
Both oil contracts are on track to achieve a second consecutive weekly increase, with WTI poised for a 3.6 percent rise and Brent expected to increase nearly 3 percent for the week.
Read more: Oil prices rise to $75.13 following 1.4 million barrel decline in U.S. inventories
Chinese stimulus hopes boost oil prices
Recent data revealed that China’s factory activity expanded in December, according to a Caixin/S&P Global survey released on Thursday, although the growth was slower than anticipated. An official report published on Tuesday indicated that manufacturing activity in China saw minimal growth in December. In contrast, the services and construction sectors performed better, suggesting that policy stimulus is beginning to make an impact in certain areas.
Beijing has indicated plans for a more relaxed monetary policy in 2025 and has rolled out a series of significant stimulus measures since late September to invigorate its sluggish economy.Â
China’s central bank has signaled intentions to reduce interest rates from the current 1.5 percent “at an appropriate time” in 2025, as reported by the Financial Times on Friday.
Traders analyze EIA data amid concerns of oversupply
In the U.S., crude oil inventories fell, while gasoline and distillate stocks saw notable increases due to weakened demand during the week ending December 27, according to the Energy Information Administration (EIA) report released on Thursday.
The EIA noted a decrease in crude inventories by 1.2 million barrels last week, which was below analysts’ expectations for a 2.8 million-barrel drop. Recent EIA data has shown that U.S. oil production remains near record highs, and the incoming administration of Donald Trump is likely to pursue policies aimed at enhancing domestic fossil fuel output.Â
This situation arises amid concerns about possible oversupply stemming from expected production hikes in non-OPEC countries, highlighting an oversupply scenario. The International Energy Agency (IEA) recently indicated that the oil market will remain adequately supplied, despite forecasts of rising demand for 2025.
Oil prices experienced an uptick on Thursday following the release of data showing a drop in U.S. oil inventories last week. Nonetheless, traders remained cautious as they considered the market outlook for the upcoming year. As of 20:39 ET (01:39 GMT), Brent oil futures rose by 0.7 percent to $75.13 per barrel, while WTI futures for February delivery also surged by 0.7 percent to $71.75 per barrel. Despite a moderate annual loss in 2024, traders approached 2025 with caution, anticipating a potentially oversupplied market this year.
The American Petroleum Institute (API) reported on Tuesday that U.S. oil inventories decreased by 1.4 million barrels last week, indicating a rise in crude oil demand, which can be favorable for prices. When inventories decline, it typically prompts traders to re-enter the market, pushing prices higher.
Anticipating oversupply in 2025
Looking forward, the oil market is bracing for a potential oversupply in 2025. Despite the recent inventory decline, the latest EIA data reveals that U.S. oil production remains near record levels. Additionally, the incoming Trump administration is expected to adopt policies designed to enhance domestic fossil fuel production.
IEA forecasts adequate supply
The International Energy Agency (IEA) recently stated that the oil market will continue to be well-supplied, even with rising demand projections for 2025. The demand outlook is closely tied to expectations that China, the world’s largest oil importer, will revitalize its economy, especially in light of concerns regarding oversupply due to anticipated production increases from non-OPEC countries. In his New Year’s address, Chinese President Xi Jinping indicated that the country would implement more proactive measures to stimulate growth in 2025.
Despite these positive indicators, traders remain cautious about the future, as increasing supply coupled with sluggish demand recovery presents challenges to market stability.
Impact of China’s manufacturing data
On Tuesday, oil prices rose, buoyed by encouraging data from China’s manufacturing sector. However, trading activity was subdued on the last day of the year as investors evaluated what the upcoming year might bring. As of 21:05 ET (02:05 GMT), Brent oil futures increased by 0.7 percent to $74.51 per barrel, while WTI crude oil futures for February delivery also saw a 0.7 percent rise to $71.05 per barrel. The decrease in trading volumes was attributed to many institutional investors taking time off during the holiday season, along with year-end profit-taking and portfolio adjustments.
