New York, January 2, Reuters - Thursday's oil prices increased roughly 2% as investors returned for the first trading day of the new year with an optimistic eye toward China's economy and fuel demand following a pledge by President Xi Jinping to drive growth.
IMG Credit : Reuters
Following gains of 65 cents on Tuesday, the last trading day of 2024, Brent crude futures rose $1.44, or 1.9%, to $76.08 a barrel by 1:28 p.m. EST (1828 GMT). At $73.32, U.S. West Texas Intermediate crude jumped $1.60, or 2.2%.Jim Ritterbusch of Ritterbusch and Associates in Florida advised "an advance such as this can become self-perpetuating until prices lift to a high enough level to attract short hedges and profit-taking that will set the stage for a return back down to lower levels." Ritterbusch, who ascribed much of the increases to positive Chinese economic data, said he expected WTI to rise to more than $74.
In his New Year's speech on Tuesday, Xi declared that China would adopt more aggressive policies aiming at fostering development in 2025.China's manufacturing activity increased in December, according to a Caixin/S&P Global survey taken on Thursday, but at a slower than expected rate given worries about how tariffs suggested by U.S. President-elect Donald Trump would impact trade.
The numbers reflected an official survey published on Tuesday, showing that December's manufacturing activity in China hardly increased. Still, services and construction performed better; the data points imply policy stimulus is finding its way into some areas.Some analysts view weaker Chinese data as positive for oil prices since it may force Beijing to quicken its stimulus effort.
Prices in the United States were not much affected by swelling fuel supplies.
Thursday, released a day later than usual due to the New Year holiday, U.S. oil stocks data from the Energy Information Administration revealed showed gasoline and distillate inventories jumped last week.
While distillate stockpiles (USOILD=ECI) open new tab, which include diesel and heating oil, increased by 6.4 million barrels in the week to 122.9 million, U.S. gasoline stocks (USOILG=ECI) opens new tab, which include diesel and heating oil, opened by 7.7 million barrel in the week to 231.4 million.
Meanwhile, crude stockpiles dropped less than expected, declining 1.2 million barrels to 415.6 million last week from analysts' estimates in a Reuters poll for a 2.8-million-barrier draw.
Said IG market analyst Tony Sycamore, traders returning to their desks are most likely weighing higher geopolitical risks and Trump running the U.S. economy red hot against the expected impact of tariffs.
"Tomorrow's U.S. ISM manufacturing release will be crucial for the next movement of crude oil," Sycamore remarked.
Sycamore said WTI's weekly chart is tightening itself, implying a significant movement is about to occur.
"We would be inclined to wait for the break and then go with it, rather than trying to forecast in which way the break will occur," he said.
A Reuters poll indicates that oil prices are likely to be limited near $70 a barrel in 2025, down for a third year following a 3% decline in 2024, with weak Chinese demand and increasing global supplies offsetting OPEC+ efforts to shore up the market.
Following the expiring of the transit agreement on December 31, Russia stopped exporting gas pipelines through Ukraine on New Year's Day in Europe. While Hungary will continue to get Russian gas via the TurkStream pipeline under the Black Sea, the European Union has set alternate supply ahead of the much anticipated stoppage.
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