Jan 3 2025: Oil prices remained steady on Friday, hovering near their highest levels in over two months as optimism grew that global policy measures could stimulate economic growth and drive fuel demand.
Brent crude futures inched up by 1 cent to $75.94 per barrel by 0720 GMT, following Thursday’s close, which marked the highest level since October 25. Similarly, U.S. West Texas Intermediate (WTI) crude edged higher by 1 cent to $73.14 per barrel, its best close since October 14.
Both benchmarks are set for a second consecutive weekly gain, supported by improved trade liquidity as investors returned from holiday breaks.
Economic Concerns and Policy Support
Economic activity ended 2024 on a subdued note, with factory output in Asia, Europe, and the U.S. reflecting concerns over trade tensions linked to Donald Trump’s upcoming presidency and China’s tepid economic recovery.
“The December PMIs for Asia were mixed, but we expect manufacturing and GDP growth to remain subdued in the short term,” analysts at Capital Economics noted, highlighting the latest Purchasing Managers’ Index data.
Central banks in Asia are likely to continue easing monetary policies to address sluggish growth and low inflation, which could encourage economic expansion and boost fuel demand.
The Federal Reserve is also expected to implement further rate cuts to support the U.S. economy. Meanwhile, Chinese President Xi Jinping has vowed to implement more aggressive stimulus measures to revitalize growth, raising hopes for increased oil consumption.
“China’s economic direction will be critical in 2025, with government stimulus expected to drive consumption and support oil demand growth,” said Alex Hodes, an analyst at StoneX.
Saudi Pricing and U.S. Inventory Trends
Traders are anticipating that Saudi Arabia, the world’s largest oil exporter, will increase crude prices for Asian buyers in February, marking the first such hike in three months. This expectation follows recent gains in Middle East benchmark prices.
In the U.S., a rise in gasoline and distillate inventories last week, despite lower fuel demand hitting a two-year low, kept market attention focused. Crude stockpiles fell by 1.2 million barrels to 415.6 million barrels, below analysts’ projections of a 2.8-million-barrel decline.
Weather forecasts predicting a cold snap in the U.S. and Europe could further support oil demand, particularly for diesel used as a heating alternative to natural gas.
Market Outlook Under Trump Presidency
As Donald Trump’s inauguration approaches on January 20, markets are closely monitoring potential changes to global trade and energy demand.
“Trump’s tariffs on China and their ripple effects on global demand will be key determinants of oil prices in 2025,” said Priyanka Sachdeva, senior market analyst at Phillip Nova.
