Dec 31 2024: Oil prices climbed on Tuesday following data showing growth in China’s manufacturing activity in December. However, prices are set to close the year lower for a second consecutive year amid persistent demand concerns in major consuming nations.
By 0730 GMT, Brent crude futures rose by 57 cents, or 0.8%, to $74.56 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 58 cents, or 0.8%, to $71.57 a barrel. For the year, Brent prices dropped 3.2%, and WTI slipped 0.1%.
China’s manufacturing sector grew for the third consecutive month in December, though at a slower pace, signaling that recent stimulus measures are supporting the world’s second-largest economy. The Chinese government also plans to issue a record 3 trillion yuan ($411 billion) in special treasury bonds in 2025 to further boost growth.
Weaker demand forecasts in China have led OPEC and the IEA to lower their oil demand projections for 2025. OPEC and its allies have postponed planned production increases until April 2025 amid declining prices. Meanwhile, the IEA anticipates global oil supply will exceed demand in 2025, with rising U.S. output outpacing sluggish consumption growth.
Despite the subdued outlook, short-term support for oil prices could come from declining U.S. crude stockpiles, which are estimated to have dropped by about 3 million barrels last week. Both Brent and WTI recently benefited from a larger-than-expected inventory drawdown as refiners increased output during the holiday season.
Next year, investors will closely watch the Federal Reserve’s interest rate decisions after the central bank projected only two rate cuts for 2025, down from four in earlier forecasts, citing persistently high inflation.
Lower interest rates generally promote borrowing and economic growth, potentially boosting oil demand. However, the dollar’s strength—driven by shifting rate expectations—has made oil more expensive for non-U.S. buyers, suppressing global demand.
Markets are also preparing for President-elect Donald Trump’s pro-growth and inflationary policies, including deregulation, tax cuts, tariff increases, and stricter immigration measures.
