Crude oil prices were set to end the first week of the new year with gains, following a shift in sentiment among traders, based on the latest economic indicator readings and expectations of growth-stimulating government policies across key markets.
Brent crude was trading at over $76 per barrel earlier in the day, topping a technical threshold that Bloomberg suggested could be the beginning of a longer rally. West Texas Intermediate topped $73 per barrel. At the time of writing, Brent was at $76.16 and WTI was at $73.39.
Expectations of an oil glut have not changed, at least not yet, but it seems that these expectations are not the leading factor for decision-making among oil traders. It seems, rather, that optimism is returning among speculators, as governments not only in China but elsewhere seek to spur economic growth.
Lower interest rates are a key tool for doing that and it appears that oil traders expect more rate cuts this year. China’s stimulus has also been a big motivator for bullish oil bet placement.
“The December PMIs for Asia were a mixed bag, but we continue to expect manufacturing activity and GDP growth in the region to remain subdued in the near term,” analysts from Capital Economics said in a note this week as quoted by Reuters. “With growth set to struggle and inflation below target in most countries, we think central banks in Asia will continue to loosen policy,” they added.
As regards China, “As China’s economic trajectory is poised to play a pivotal role in 2025, hopes are pinned on government stimulus measures to drive increased consumption and bolster oil demand growth in the months ahead,” an analyst from StoneX told Reuters.
Prices this week also got a boost from the latest U.S. oil inventory report, which showed a draw in crude oil, although that was accompanied by solid builds in both gasoline and middle distillates.
Oilprice.com