Oil prices experienced a rise on Tuesday, buoyed by encouraging data from China’s manufacturing sector. However, trading activity was low on the last day of the year as investors evaluated the prospects for the upcoming year.
As of 21:05 ET (02:05 GMT), Brent oil futures climbed 0.7 percent to $74.51 per barrel, while crude oil WTI futures for February delivery also saw a 0.7 percent increase, reaching $71.05 per barrel.
With the New Year approaching, trading volumes were diminished, as many institutional investors and traders opted for time off during the holiday season. Year-end profit-taking and portfolio adjustments further contributed to the reduced trading activity.
Read more: Oil prices dip 6 cents with Brent at $74.11 as investors watch for China and U.S. data
Focus on Chinese manufacturing data and upcoming U.S. ISM survey
In December, China’s manufacturing sector showed expansion, albeit at a slower rate than anticipated. This marked the third consecutive month of growth, supported by a series of new stimulus measures, according to purchasing managers index data released on Tuesday.
The outlook for oil demand heavily relies on the hope that China, the world’s largest oil importer, can revitalize its economy. This is particularly relevant amid concerns about a potential oversupply due to anticipated production increases from non-OPEC countries.
Markets are keenly awaiting further details on Beijing’s plans for stimulus measures in the coming year. Recent reports indicate that the country intends to increase fiscal spending to bolster economic growth.
Additionally, the U.S. is set to release the ISM survey for December on Friday, which traders will scrutinize for insights into the economic activity of the world’s largest energy consumer.
Yearly losses for oil prices amid demand outlook concerns
Both oil contracts are on track for annual declines, with WTI expected to fall nearly 1 percent and Brent projected to drop nearly 4 percent. Traders remain cautious about China’s economic outlook and the looming possibility of oversupply in the months ahead.
The International Energy Agency (IEA) recently raised its demand forecast for the next year but maintained that the oil market will remain adequately supplied. Latest data from the Energy Information Administration (EIA) indicates that U.S. oil production remains near record levels, and the incoming Donald Trump administration is likely to pursue policies aimed at enhancing domestic fossil fuel production.
Market participants are also wary of broader economic issues, including weaker-than-expected demand growth in China, a crucial driver for global oil consumption. China’s oil demand has been contracting, further highlighting the anticipated oversupply situation. Concerns are growing regarding the 2025 outlook as increasing supply and sluggish demand recovery threaten market stability.
On Monday, oil prices experienced a slight dip in limited holiday trading as market participants looked forward to significant economic data from China and the U.S. later in the week, hoping to assess growth prospects for the world’s two largest oil consumers.
Brent crude futures fell by 6 cents, settling at $74.11 a barrel by 01:11 GMT, while the more actively traded March contract also dropped 6 cents to $73.73 a barrel. Meanwhile, U.S. West Texas Intermediate crude decreased by 8 cents, bringing it to $70.52 a barrel. Both contracts saw an approximate 1.4 percent increase last week, supported by a larger-than-expected reduction in U.S. crude inventories for the week ending December 20, as refiners ramped up operations and the holiday season drove fuel demand.
Optimism surrounding china’s economic outlook
Oil prices received a boost from optimism regarding China’s economic growth prospects for the upcoming year, which could potentially enhance demand from the leading crude oil importer. To stimulate growth, Chinese authorities have committed to issuing a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025, as reported by Reuters last week.
World bank projections and economic sentiment
In a separate update, the World Bank revised its projections for China’s economic growth in 2024 and 2025, though it cautioned that weak household and business confidence, along with ongoing challenges in the property sector, will continue to exert downward pressure next year.
Market participants are closely monitoring China’s PMI factory surveys set for release on Tuesday, as well as 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 diminishing, following Russian President Vladimir Putin’s remarks on Thursday indicating that there is not enough time left this year to finalize a new deal. Analysts predict that reduced piped Russian gas supplies will compel Europe to increase its imports of liquefied natural gas (LNG).
