New Year, New Optimism: Oil Prices Surge on China’s Growth Pledge
As the world welcomed the new year, oil prices saw a significant boost on Thursday, driven by investor optimism about China’s economic growth and fuel demand. The country’s President, Xi Jinping, vowed to implement more proactive policies to promote growth in 2025, sparking hopes of increased energy consumption.
Brent Crude Futures Soar
Brent crude futures rose by $1.04, or 1.39%, to $75.68 a barrel by 1205 GMT, building on Tuesday’s gain of 65 cents. Meanwhile, U.S. West Texas Intermediate crude climbed $1.02, or 1.42%, to $72.74.
China’s Factory Activity Grows, But at a Slower Pace
A Caixin/S&P Global survey released on Thursday showed that China’s factory activity grew in December, albeit at a slower pace than expected. This was echoed by an official survey released on Tuesday, which indicated that China’s manufacturing activity barely grew in December. However, services and construction sectors fared better, suggesting that policy stimulus is starting to take effect.
Weaker Chinese Data: A Blessing in Disguise?
Some analysts believe that weaker Chinese data could prompt Beijing to accelerate its stimulus program, which could ultimately benefit oil prices. Traders are also weighing the impact of proposed tariffs by U.S. President-elect Donald Trump and higher geopolitical risks against the expected boost from stimulus measures.
Key Data Releases Ahead
Investors are eagerly awaiting tomorrow’s US ISM manufacturing release, which could significantly influence crude oil’s next move. Additionally, weekly U.S. oil stocks data from the Energy Information Administration, postponed due to the New Year holiday, is expected to provide valuable insights into the market.
Oil Demand Reaches Highest Level Since Pandemic
October’s oil demand reached a record 21.01 million barrels per day (bpd), up about 700,000 bpd from September, according to EIA data. Crude output from the world’s top producer also rose to a record 13.46 million bpd in October, up 260,000 bpd from September.
Oil Prices: A Constrained Outlook
Despite the current surge, oil prices are likely to remain constrained near $70 a barrel in 2025, down for a third year after a 3% decline in 2024. Weak Chinese demand and rising global supplies are expected to offset OPEC+ efforts to shore up the market.
European Energy Landscape Shifts
In Europe, Russia halted gas pipeline exports through Ukraine on New Year’s Day after the transit agreement expired on Dec. 31. However, the European Union has arranged alternative supply ahead of the expected stoppage, while Hungary will continue to receive Russian gas via the TurkStream pipeline under the Black Sea.
Leave a Reply