Oil prices experienced an uptick on Thursday, as attention shifted decisively toward the prospect of increased fiscal stimulus in China, the leading importer of crude. Meanwhile, traders were processing the implications of Donald Trump’s presidency following his victory in the 2024 elections.
Crude prices were recovering from losses incurred during the previous session, where Trump’s electoral win propelled the dollar to a four-month high, exerting pressure on oil markets. The U.S. dollar stabilized on Thursday after its recent surge.
Further weighing on oil markets were reports indicating a larger-than-expected rise in U.S. inventories. By 20:19 ET (01:19 GMT), January Brent oil futures climbed 0.5 percent to $75.28 a barrel, while West Texas Intermediate crude futures rose 0.4 percent to $71.54 a barrel.
China’s NPC meeting signals potential fiscal measures
Earlier this week, China’s National People’s Congress (NPC) commenced a four-day session, where it is anticipated to unveil plans for increased fiscal spending aimed at bolstering economic growth. As the world’s largest oil importer grapples with a sustained slowdown, significant fiscal measures are expected to be announced. Over the past month, Beijing has introduced several aggressive stimulus initiatives, with the NPC meeting expected to shed more light on these fiscal strategies.
Analysts at JPMorgan noted in a recent report that Trump’s victory might prompt Beijing to accelerate its fiscal stimulus efforts, particularly in light of Trump’s commitment to imposing substantial trade tariffs on China.
Markets react to Trump’s win and U.S. indicators
Following Trump’s election victory, oil prices initially fell on Wednesday, driven by worries that U.S. oil production could rise further under his administration, exacerbating the existing global supply surplus. However, prices mitigated some losses as traders speculated that Trump would adopt a tough stance, potentially resulting in additional sanctions that could restrict global oil supply.
Moreover, Trump is expected to implement more expansive economic policies, which could support U.S. demand for oil in the years ahead. Alongside these political developments, markets received negative signals from data indicating a more substantial inventory gain in the U.S.
Traders remained vigilant regarding potential supply disruptions in the Gulf of Mexico due to Hurricane Rafael, which is forecasted to traverse the oil-rich area this week. Additionally, a Federal Reserve meeting was anticipated to conclude later on Thursday, with expectations for a 25 basis point cut in interest rates.
Decline amid inventory data
On Wednesday, oil prices dropped following industry reports of a larger-than-expected increase in U.S. inventories, while market participants remained alert to potential supply interruptions from a hurricane in the Gulf of Mexico. The ongoing U.S. presidential election and a significant political gathering in China were also under scrutiny for further insights.
By 20:11 ET (01:11 GMT), January Brent oil futures had decreased by 0.6 percent to $75.11 a barrel, while West Texas Intermediate crude futures fell 0.5 percent to $71.24 a barrel. Recent sessions had seen some price gains, largely attributed to OPEC+ postponing plans to boost production this year, in addition to expectations of U.S. supply disruptions and a weaker dollar.
API reports notable inventory increase
The American Petroleum Institute (API) reported that U.S. oil inventories increased by 3.1 million barrels for the week ending November 1, significantly surpassing the forecasted rise of 1.8 million barrels. Minor declines were noted in product inventories, including gasoline and distillates. This data, which typically precedes an official inventory report, raised concerns about a potential weakening in U.S. fuel demand, especially with winter approaching.
High U.S. production levels persist
U.S. oil production is projected to remain near record levels, exceeding 13 million barrels per day, maintaining relatively high domestic supplies. However, potential disruptions in U.S. production could arise as energy companies begin evacuating personnel in the Gulf of Mexico ahead of Hurricane Rafael, which was upgraded to a category-1 hurricane on Tuesday and is expected to make landfall in Louisiana later this week.
Oil prices found stability on Tuesday after a significant increase in recent trading sessions, as traders looked for additional insights from the upcoming U.S. presidential election and a key political summit in China. Tensions in the Middle East also offered some limited support for crude prices. By 20:02 ET (01:02 GMT), January Brent oil futures had dropped by 0.2 percent to $74.93 per barrel, while West Texas Intermediate (WTI) crude futures mirrored this decline, also falling 0.2 percent to $70.90 per barrel.
Prices stabilize amid political developments
On Monday, oil prices surged following the announcement from the Organization of the Petroleum Exporting Countries and its allies (OPEC+) regarding a one-month postponement of their planned output increases, which tightened the market outlook. Despite these recent gains, oil prices remained close to the near three-year lows recorded earlier this year, amid ongoing concerns about dwindling demand, particularly from China, the largest oil importer. On that same Monday, prices continued to rise, gaining over $1 after OPEC+ revealed the delay. By 04:02 GMT, Brent futures had increased by $1.18 per barrel, representing a 1.61 percent rise to $74.28 per barrel. Meanwhile, WTI crude recorded an increase of $1.21 per barrel, or 1.74 percent, reaching $70.70.
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