Oil Prices Get a Boost from China’s Fiscal Stimulus Hopes
As the world celebrates the holiday season, oil prices are on the rise, driven by expectations of increased fiscal stimulus in China, the largest oil importer globally. The news that Chinese authorities have agreed to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year has sparked optimism in the market.
A Shot in the Arm for the Economy
Beijing’s move to ramp up fiscal stimulus is aimed at reviving a faltering economy, and it’s expected to have a positive impact on oil demand. The World Bank has raised its forecast for China’s economic growth in 2024 and 2025, although it warned that subdued household and business confidence, along with headwinds in the property sector, would continue to weigh it down next year.
Oil Inventories Take a Dip
Meanwhile, an industry report from the American Petroleum Institute showed a decline in U.S. crude inventories last week, with stocks falling by 3.2 million barrels. This has added to the upward pressure on oil prices. Traders are now eagerly awaiting the official inventory report from the Energy Information Administration, due out on Friday, to see if it confirms the decline.
Market Expectations
Analysts expect crude inventories to have fallen by about 1.9 million barrels in the week to Dec. 20, while gasoline and distillate inventories are seen falling by 1.1 million barrels and 0.3 million barrels respectively. Giovanni Staunovo of UBS believes that the market is still undersupplied, which should support oil prices. Additionally, expectations of further fiscal and monetary stimulus in China are also bolstering prices.
A New Era for Oil Production
Satoru Yoshida, a commodity analyst at Rakuten Securities, notes that expectations of increasing fossil fuel production and demand after U.S. President-elect Donald Trump takes office next month are also contributing to the upward trend in oil prices.
Current Prices
As of 1221 GMT, Brent crude futures were up 25 cents, or 0.3%, to $73.83 a barrel, while U.S. West Texas Intermediate crude was at $70.49, up 0.6%, or 39 cents, from Tuesday’s pre-Christmas settlement.
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