Oil prices saw a slight increase on Tuesday due to positive manufacturing data from China, which indicated growth for the third consecutive month. Brent crude rose to $74.56 per barrel, while U.S. West Texas Intermediate increased to $71.57 per barrel. However, both oil benchmarks are projected to decline for the second straight year due to concerns about demand in major consumer countries, particularly China. OPEC and the International Energy Agency have adjusted their demand forecasts downwards, expecting supply to outpace demand in 2025. Additionally, a stronger U.S. dollar is making oil more expensive for consumers abroad, further impacting demand. Market focus will also be on the Federal Reserve’s interest rate decisions in the coming year, which could influence oil consumption.
Oil Prices Rise Following China’s Manufacturing Data
Oil prices saw an uptick on Tuesday, influenced by encouraging data from China, which indicated that manufacturing activity grew in December. However, despite this positive news, analysts warn that oil prices are set to finish lower for the second consecutive year, primarily due to concerns over demand in key consuming nations.
As of 0730 GMT, Brent crude futures increased by 57 cents to reach $74.56 a barrel, while U.S. West Texas Intermediate (WTI) crude rose by 58 cents to settle at $71.57 a barrel. Over the course of the year, Brent has experienced a 3.2% decline, and WTI is down by 0.1%.
China’s latest manufacturing figures show that activity expanded for the third consecutive month, though at a decelerating rate. This slowdown suggests that while government stimulus efforts are supporting the economy, they may not be sufficient to ensure robust demand moving forward. The Chinese government is also planning to issue a record 3 trillion yuan in special treasury bonds aimed at revitalizing economic growth in 2025.
Both OPEC and the International Energy Agency have recently adjusted their forecasts for oil demand in light of a weaker outlook. The organization has postponed its output increase plan until April 2025, amid falling oil prices and rising supply from U.S. producers. Consequently, global oil supply is anticipated to outstrip demand in 2025, even with OPEC+ production cuts in place.
In the short term, oil prices could receive a boost from decreasing stockpiles, with a significant drawdown from U.S. crude inventories reported in the week ending December 20. This reduction is attributed to ramped-up refinery activity and increased fuel demand during the holiday season.
Investor attention is likely to shift towards the U.S. Federal Reserve’s interest rate policies in the upcoming year. The central bank, projecting fewer rate cuts than previously anticipated, could influence borrowing and fuel economic growth, potentially leading to increased oil demand.
Furthermore, a stronger U.S. dollar brings additional challenges, as it makes oil more costly for foreign consumers, negatively impacting demand. Markets are also bracing for potential economic changes under President-elect Donald Trump, whose policies are expected to stimulate growth and possibly increase inflation.
Overall, while immediate indicators like China’s manufacturing report have offered some relief for oil prices, broader economic trends and global supply-demand dynamics continue to weigh heavily on the Market.
Tags: Oil Prices, China Manufacturing, OPEC, Economic Growth, U.S. Dollar
What happened with oil prices and Chinese factory activity?
Oil prices rose because factory activity in China is getting better. This news shows that demand for oil may increase, boosting prices.
Why does Chinese factory activity affect oil prices?
China is one of the largest oil consumers in the world. When its factories are busy, they use more energy, which raises the need for oil.
Will oil prices stay high after the end of the year?
Experts believe that while prices may rise now, they could end the year lower. This is due to various factors including global supply and demand.
What factors could cause oil prices to drop?
Several factors can influence the drop in oil prices, such as increased production from other countries, changes in demand due to economic slowdowns, or shifts in energy policies.
Is it a good time to invest in oil?
Investing in oil can be risky. It’s important to watch Market trends, such as factory output in countries like China and overall economic conditions before making decisions.
