Oil prices dipped on Monday in limited holiday trading as market participants looked ahead to important economic data from China and the U.S. later this week, aiming to gauge growth prospects for the world’s two largest oil consumers.
Brent crude futures decreased by 6 cents, settling at $74.11 a barrel by 01:11 GMT, while the more actively traded March contract also fell 6 cents to $73.73 a barrel. Meanwhile, U.S. West Texas Intermediate crude saw an 8-cent decline, bringing it to $70.52 a barrel.
Both contracts experienced a roughly 1.4 percent increase last week, supported by a larger-than-anticipated drawdown in U.S. crude inventories for the week ending December 20, as refiners increased their operations and the holiday season spurred fuel demand.
Chinese economic outlook
Additionally, oil prices found support from optimism regarding China’s economic growth prospects for the coming year, which could boost demand from the leading crude oil importer. To stimulate growth, Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, as reported by Reuters last week.
Read more: Oil prices steady at $73.22 and $69.19 amid holiday trading slowdown
World Bank projections and economic confidence
In a separate update, the World Bank raised its projections for China’s economic growth in 2024 and 2025 but cautioned that subdued household and business confidence, along with challenges in the property sector, would continue to exert downward pressure next year.
Market participants were closely monitoring China’s PMI factory surveys that were set for release on Tuesday, along with the U.S. ISM survey scheduled for Friday.
In Europe, expectations for a new agreement to facilitate the transit of Russian gas through Ukraine are dwindling, following Russian President Vladimir Putin’s statement on Thursday that there was insufficient time left this year to finalize a new deal. Analysts predict that the reduction in piped Russian gas will compel Europe to increase its imports of liquefied natural gas (LNG).
Stability amid holiday trading
Oil prices remained relatively stable on Friday as the holiday-shortened trading week led to decreased trading volumes. Traders displayed caution as they approached year-end, reflecting on the outlook for the year ahead. At 20:37 ET (01:37 GMT), Brent oil futures held steady at $73.22 a barrel, while West Texas Intermediate (WTI) crude oil futures showed little change at $69.19 a barrel.
Trading activity was muted in anticipation of the new year, as many institutional investors and traders typically take leave during the holiday season. Additionally, year-end profit-taking and portfolio rebalancing contributed to the lower trading volumes.
Following the Christmas holiday, oil prices saw an uptick on Thursday, buoyed by new stimulus measures in China and a decrease in U.S. crude inventories. As of 21:06 ET (02:06 GMT), Brent oil futures had risen by 0.2 percent to $73.71 a barrel, while WTI crude futures also increased by 0.2 percent, reaching $69.80 a barrel. Low trading volumes are expected to persist for the remainder of the holiday-shortened week, following a more than 1 percent rise on Tuesday due to reports of new stimulus initiatives from China.
Future price projections and demand concerns
Looking ahead, oil prices are projected to decline in 2024 amid uncertainties surrounding demand. Both Brent and WTI prices have fallen approximately 5 percent this year, primarily due to ongoing concerns about weakening demand in China. As the world’s largest oil importer faces sluggish economic growth, oil imports have decreased throughout the year. While plans for increased fiscal spending and stimulus measures have been proposed for the upcoming year, the market is still awaiting more specific details.
Impact of electric vehicle adoption
The burgeoning adoption of electric vehicles in China has also contributed to the reduction in fuel demand within the nation. Both OPEC and the International Energy Agency (IEA) have forecasted slower demand growth in 2025, attributing this trend to diminished demand in China, which may encounter additional economic challenges stemming from a renewed trade conflict with the U.S. under Donald Trump. Consequently, oil markets are exercising caution regarding the potential for a supply surplus in 2025. Although OPEC has recently agreed to extend its current supply cuts until at least mid-2025, production levels in other regions may rise. U.S. oil production remains near record highs and could increase further in the coming year, especially with Trump’s pledges to enhance domestic energy production.
