By Laila Kearney
NEW YORK (Reuters) -Oil prices rose about 2% on Thursday as investors returned for the first trading day of the new year with an optimistic eye on China’s economy and fuel demand after a pledge by President Xi Jinping to promote growth.
Brent crude futures rose $1.44, or 1.9%, to $76.08 a barrel by 1:28 p.m. EST (1828 GMT), after gaining 65 cents on Tuesday, the last trading day of 2024. U.S. West Texas Intermediate crude climbed $1.60, or 2.2%, at $73.32.
“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,” said Jim Ritterbusch of Ritterbusch and Associates in Florida. Ritterbusch, who attributed much of the gains to upbeat Chinese economic data, said he expects WTI to advance to more than $74.
Xi said in his New Year’s address on Tuesday that China would implement more proactive policies to promote growth in 2025.
China’s factory activity grew in December, a Caixin/S&P Global survey showed on Thursday, but at a slower pace than expected, amid concerns about how tariffs proposed by U.S. President-elect Donald Trump will affect trade.
The data echoed an official survey released on Tuesday, which showed China’s manufacturing activity barely grew in December. However, services and construction fared better, with the data suggesting policy stimulus is trickling into some sectors.
Weaker Chinese data is seen by some analysts as positive for oil prices because it could prompt Beijing to accelerate its stimulus programme.
Swelling fuel inventories in the United States had little effect on prices.
U.S. oil stocks data from the Energy Information Administration on Thursday, released a day later than normal due to the New Year holiday, showed that gasoline and distillate inventories jumped last week.
U.S. gasoline stocks rose by 7.7 million barrels in the week to 231.4 million barrels, while distillate stockpiles, which include diesel and heating oil, increased by 6.4 million barrels in the week to 122.9 million barrels.
Crude stockpiles, meanwhile, fell less than expected, decreasing by 1.2 million barrels to 415.6 million barrels last week compared with analysts’ expectations in a Reuters poll for a 2.8-million-barrel draw. [EIA/S]
As traders return to their desks, they are probably weighing higher geopolitical risks and Trump running the U.S. economy red hot against the expected impact of tariffs, said IG market analyst Tony Sycamore.
“Tomorrow’s U.S. ISM manufacturing release will be key to crude oil‘s next move,” Sycamore said.
Sycamore said WTI’s weekly chart is winding itself into a tighter range, suggesting that a big move is coming.
“Rather than trying to predict in which way the break will occur, we would be inclined to wait for the break and then go with it,” he added.
Oil prices are likely to be constrained near $70 a barrel in 2025, down for a third year after a 3% decline in 2024, with weak Chinese demand and rising global supplies offsetting OPEC+ efforts to shore up the market, a Reuters poll showed.
In Europe, Russia halted gas pipeline exports through Ukraine on New Year’s Day after the transit agreement expired on Dec. 31. The European Union has arranged alternative supply ahead of the widely expected stoppage while Hungary will keep receiving Russian gas via the TurkStream pipeline under the Black Sea.
This post is originally published on INVESTING.
