Oil price rise on China growth outlook and strong U.S. demand
Oil prices rise with strong U.S. demand and China’s recovery
Crude oil prices climbed on Friday, buoyed by optimism surrounding China’s economic recovery and strong demand signals from the United States. Brent crude traded at $73.18 per barrel, while West Texas Intermediate (WTI) rose to $69.58 per barrel.
The gains followed the World Bank’s upward revision of China’s GDP growth forecast for 2024 and 2025, with China also revising its 2023 GDP growth estimate upward by a substantial 2.7%. These developments fueled hopes of stronger demand from the world’s largest crude importer.
Adding to the bullish momentum, the American Petroleum Institute (API) reported a substantial crude inventory draw of 3.2 million barrels, signaling robust US demand. The Energy Information Administration (EIA) is set to release its weekly inventory report later today, which could further confirm these trends.
USOIL price movement (Oct 2024 - Dec 2024) Source: TradingView.
OPEC+ stance and geopolitical stability limit annual gains
Despite the weekly gains, oil prices are on track for an annual decline of nearly 3%. The downturn reflects market expectations of OPEC+ ramping up production—a scenario that has not materialized. Traders have also factored in the unexpected stability in the Middle East despite heightened geopolitical tensions, including exchanges between Iran and Israel. The absence of supply disruptions in the region has capped price increases.
Additionally, ING analysts forecast modest demand growth for 2025, attributing it to cyclical and structural factors. Strong non-OPEC supply growth and OPEC’s substantial spare capacity are expected to maintain market equilibrium in the coming year.
China’s economic policies and European trends in focus
China’s announcement of new economic measures, such as granting flexibility for government bond usage, has also contributed to the oil price rally. However, persistent weaknesses in consumer confidence and the property sector may temper long-term demand growth.
Meanwhile, reports indicate a pivot among European energy companies toward oil and gas investments over renewables, emphasizing short-term profitability—a trend likely to persist through 2025.
Previously, we discussed WTI crude oil's stabilization near $69.30 amid global uncertainties and breakout patterns, which continue to provide essential insights into future price dynamics.
