Oil Prices Steady Amid Easing Supply Concerns and Disappointing Stimulus
The threat of supply disruptions from a U.S. storm has receded, and China’s latest stimulus plan has failed to impress investors seeking fuel demand growth. As a result, oil prices have shown little movement on Monday.
Easing Storm Concerns
Brent crude futures have edged down by 9 cents, or 0.1%, to $73.78 a barrel, while U.S. West Texas Intermediate crude futures have fallen by 15 cents, or 0.2%, to $70.23 a barrel. This comes after both benchmarks dropped more than 2% on Friday.
China’s Underwhelming Stimulus
Beijing’s stimulus package, announced at the National People’s Congress (NPC) standing committee meeting on Friday, has fallen short of market expectations. According to IG market analyst Tony Sycamore, the package’s unclear forward guidance suggests only modest stimulus for housing and consumption. This has led analysts to believe that the support measures will not significantly boost China’s oil demand growth or crude oil imports.
China’s Slowing Oil Demand
Oil consumption in China, which has driven global demand growth for years, has stagnated in 2024. The country’s slowing economic growth, declining gasoline use due to the rapid adoption of electric vehicles, and the shift from diesel to liquefied natural gas as a truck fuel have all contributed to this trend.
U.S. Election Impact
With the U.S. presidential election now behind us, attention is shifting back to the underlying fundamentals. However, concerns remain about the potential impact of the new Trump administration on U.S. oil and gas output. While analysts don’t expect 2025’s production forecast to change, there are worries that producers may hesitate to increase supply in an era where OPEC+ has already outlined plans to gradually raise production targets.
Global Economic Outlook
Trump’s election promise to hike import tariffs has clouded the global economic outlook. However, expectations that he could tighten sanctions on OPEC producers Iran and Venezuela and cut oil supply to global markets had previously driven oil prices up by more than 1% last week.
Looking Ahead
As the oil market moves forward, investors will be keeping a close eye on the interplay between supply and demand. With the threat of supply disruptions easing and China’s stimulus package disappointing, oil prices are likely to remain volatile in the coming weeks.
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