Oil prices remained largely stable on Thursday as traders weighed a multitude of factors, including potential U.S. oil sanctions, new stimulus initiatives in China, and a pessimistic outlook on oil demand from OPEC. Prices steadied following a sharp rise in the previous session, fueled by expectations of tighter global supplies due to the U.S. preparing additional sanctions against Russia. This stability also followed gains sparked by China, the top oil importer, indicating enhanced economic support earlier in the week.
As of 09:04 PM ET (02:04 GMT), Brent Oil Futures dipped slightly to $73.50 a barrel, while Crude Oil WTI Futures decreased by 0.1 percent to $69.79 a barrel. Both contracts, set to expire in February, had surged over 2 percent on Wednesday.
This price action occurred despite the Organization of the Petroleum Exporting Countries (OPEC) revising its forecasts for oil demand growth downwards for 2024 and 2025, marking its fifth consecutive downward adjustment. Meanwhile, U.S. Treasury Secretary Janet Yellen remarked on Wednesday that a softened global oil market could provide an opportunity for further actions against Russia’s energy sector, as the U.S. continues efforts to constrain Moscow’s capabilities in its conflict with Ukraine.
China stimulus and Middle East tensions boost oil prices
Oil prices found support from expectations of new stimulus measures from China, the world’s largest oil importer, coinciding with the commencement of the Central Economic Work Conference (CEWC) on Wednesday. The Chinese government announced intentions to loosen monetary policy and implement targeted stimulus to enhance economic growth, as indicated by the country’s Politburo earlier this week.
Additionally, oil prices maintained a higher risk premium amidst escalating tensions in the Middle East, especially following recent events where Syria’s rebel forces overthrew the government and took control of Damascus.
Markets assess U.S. CPI and crude inventories
The consumer price index (CPI) for the U.S., released on Wednesday, aligned with expectations and solidified predictions that the Federal Reserve might cut interest rates in the upcoming week. Such a move could potentially stimulate economic activity in the world’s largest energy consumer, thereby increasing demand.
Government data disclosed on Wednesday revealed that U.S. oil inventories unexpectedly rose more than anticipated in the week ending December 6. Additionally, oil production reached a new peak, with consecutive increases in gasoline and distillate inventories for a second week, suggesting resilience in U.S. supplies.
The market is now looking forward to a monthly report from the International Energy Agency (IEA), which is expected to offer further insights into demand projections. The IEA maintains a more conservative perspective on demand compared to OPEC.
Oil prices saw a modest uptick on Wednesday, driven by ongoing optimism regarding stimulus measures in China. Traders remained watchful for further details concerning the U.S. economy and oil inventories. The rise in crude prices was somewhat tempered by the strengthening dollar, which gained momentum ahead of critical U.S. inflation figures anticipated later in the day—figures likely to impact interest rate forecasts. Geopolitical tensions also continued to support oil’s risk premium as the market awaited the formation of a new government in Syria following the ousting of President Bashar al-Assad.
Brent crude futures for February delivery climbed 0.4 percent to $72.47 a barrel, while West Texas Intermediate (WTI) crude futures similarly rose by 0.4 percent, reaching $68.55 a barrel by 20:41 ET (01:41 GMT).
Read more: Oil prices surge modestly amid China’s stimulus optimism and U.S. economic indicators
Unexpected rise in U.S. inventories
Data from the American Petroleum Institute (API) released on Tuesday indicated an unexpected increase in U.S. oil inventories by approximately 0.5 million barrels for the week ending December 6, contrasting with forecasts of a 1.3 million barrel decline. The API report also noted consecutive weekly rises in gasoline and distillate inventories, reflecting some resilience in U.S. supplies amid record-high oil production levels.
With winter approaching, demand is expected to diminish, likely leading to elevated inventory levels in the coming months. Typically, the API data precedes a similar report from the official inventory sources, which is due later on Wednesday.
On Tuesday, oil prices experienced a slight decline following recent gains driven by China’s heightened stimulus commitments and increasing geopolitical tensions in Syria. Traders remained cautious ahead of significant economic indicators from both China and the U.S., as well as the upcoming OPEC report.
Brent crude futures for February delivery fell by 0.2 percent, settling at $72.00 per barrel, while WTI crude futures also decreased by 0.2 percent, reaching $67.96 per barrel by 20:44 ET (01:44 GMT).
