Agencies
SINGAPORe
Oil prices rose on Tuesday after data showed China’s manufacturing activity expanded in December, but they are on track to end lower for a second consecutive year due to demand concerns in top consuming countries, according to Reuters.
Brent crude futures rose 60 cents, or 0.8 percent, to $74.59 a barrel as of 08:30 am Saudi time. US West Texas Intermediate crude gained 62 cents, or 0.9 percent, to $71.61 a barrel. For the year, Brent declined 3.2 percent, while WTI was down 0.1 percent.
China’s manufacturing activity expanded for a third straight month in December but at a slower pace, an official factory survey showed on Tuesday, suggesting a blitz of fresh stimulus is helping to support the world’s second-largest economy.
Chinese authorities have also agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to revive economic growth, Reuters reported last week.
A weaker demand outlook in China has forced both OPEC and the International Energy Agency to cut their oil demand expectations for 2025.
OPEC and its allies earlier this month delayed their plan to start raising output until April 2025 against a backdrop of falling prices. The IEA expects global oil supply to exceed demand in 2025 even if OPEC+ cuts remain in place, as rising production from the US and other outside producers outpaces sluggish demand.
While a weak longer-term demand outlook has weighed on prices, they could find short-term support from declining US crude stockpiles, which are expected to have fallen by about 3 million barrels last week.
Both Brent and WTI were buoyed by a larger-than-expected drawdown from US crude inventories in the week ended Dec. 20 as refiners ramped up activity and the holiday season boosted fuel demand.
Investor focus next year will be on the Federal Reserve’s rate path after the central bank earlier this month projected just two rate cuts, down from four in September, due to stubbornly high inflation.
Lower interest rates generally incentivize borrowing and fuel growth, which in turn is expected to boost oil demand.
The shifting expectations around US rates and the widening interest rate differentials between the US and the other economies have lifted the dollar and weighed on other currencies.
A stronger dollar makes purchases of oil more expensive for consumers outside the US, weighing on demand.
