Oil prices remained largely unchanged on Friday as a holiday-shortened trading week resulted in reduced volumes. Traders exhibited caution as they approached the year-end, reflecting on the outlook for the coming year. At 20:37 ET (01:37 GMT), Brent oil futures were stable at $73.22 a barrel, while West Texas Intermediate (WTI) crude oil futures showed minimal movement at $69.19 a barrel.
Trading activity was subdued ahead of the new year, as many institutional investors and traders typically take time off during the holiday season. Additionally, year-end profit-taking and portfolio rebalancing contributed to the lower trading volumes.
Awaiting EIA data after API reports decline in U.S. crude inventories
The U.S. Energy Information Administration (EIA), part of the U.S. Department of Energy, is set to release its weekly report later on Friday. These statistics offer valuable insights into the supply and demand dynamics of the U.S. crude oil market, significantly impacting pricing and economic decisions. Earlier this week, reports indicated a drop in U.S. oil inventories by 3.2 million barrels for the week ending December 20, based on data from the American Petroleum Institute (API). This reduction suggests a tightening supply in the U.S. crude oil market, which could affect global oil prices. Following the API’s report, oil prices edged higher, buoyed by expectations of additional fiscal stimulus in China and the reported decline in U.S. crude inventories.
Gasoline inventories saw an increase of 3.9 million barrels last week, while distillate inventories, which include diesel and heating oil, decreased by approximately 2.5 million barrels.
Read more: Crude oil prices rise 0.2 percent on new China stimulus, U.S. inventory declines
Ongoing hopes for Chinese economic stimulus
Chinese authorities have announced plans to issue an unprecedented 3 trillion yuan (around $411 billion) in special treasury bonds next year as part of an intensified effort to stimulate a faltering economy, according to a Reuters report from Tuesday. Furthermore, local officials are being permitted to broaden investments with key government bonds and simplify approval processes, as indicated by a government document released on Wednesday.Â
On Thursday, the World Bank upgraded its economic growth forecast for China for 2024 and 2025 but noted that weak household and business confidence, along with challenges in the property sector, would continue to impede growth in the upcoming year. The outlook for oil demand is closely tied to the hope that China, the largest oil importer globally, can revitalize its economy, especially amid concerns about a possible oversupply due to anticipated production increases from non-OPEC countries.
Oil prices saw a rise on Thursday following the Christmas holiday, supported by new stimulus measures in China and a reduction in U.S. crude inventories. As of 21:06 ET (02:06 GMT), Brent oil futures had climbed by 0.2 percent to $73.71 a barrel, while WTI crude oil futures also increased by 0.2 percent, reaching $69.80 a barrel. Trading volumes are expected to remain low for the remainder of the holiday-shortened week. Following a more than 1 percent rise on Tuesday, oil prices continued to advance on Thursday due to reports of fresh stimulus initiatives from China.
Declining oil prices in 2024 amid demand uncertainties
In 2024, both Brent and WTI prices have experienced a decline of approximately 5 percent, primarily due to ongoing concerns regarding diminishing demand in China. As the world’s largest oil importer grapples with 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.Â
The rise in electric vehicle adoption in China has also contributed to the reduction in fuel demand within the country. Both OPEC and the International Energy Agency (IEA) have projected slower demand growth in 2025, attributing this trend to weakened demand in China, which may face further economic challenges from a renewed trade conflict with the U.S. under Donald Trump. 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 increase. U.S. oil production remains near record highs and could rise further in the coming year, particularly with Trump’s pledges to boost domestic energy production.
