As the world welcomed the start of a new year in 2025, investors returned to the markets with renewed optimism regarding China’s economy and fuel demand. This positivity was fueled by President Xi Jinping’s pledge to promote growth in the country.
Brent Crude Futures Settle at $75.93 per Barrel
On Thursday, oil prices settled up by more than $1 a barrel, marking a positive start to the year. Brent crude futures rose by 1.7% to settle at $75.93 a barrel, while U.S. West Texas Intermediate (WTI) crude increased by 2% to settle at $73.13 per barrel.
Xi Jinping’s Pledge to Promote Growth in China
In his New Year’s address on Tuesday, President Xi Jinping announced that China would implement more proactive policies to promote growth in 2025. This news has been met with enthusiasm by investors, who are optimistic about the potential for increased fuel demand.
Weaker Chinese Data Seen as Positive for Oil Prices
While some analysts may view weaker Chinese data as a negative sign, others see it as an opportunity for Beijing to accelerate stimulus measures. A Caixin/S&P Global survey revealed that China’s factory activity grew more slowly than expected in December, amid concerns about tariffs proposed by U.S. President-elect Donald Trump.
U.S. Oil Stocks Data Shows Large Product Stock Builds
The Energy Information Administration (EIA) released data on Thursday showing a significant increase in gasoline and distillate inventories in the U.S. last week. Gasoline stocks rose by 7.7 million barrels to reach 231.4 million barrels, while distillate stockpiles increased by 6.4 million barrels to stand at 122.9 million barrels.
Analysts Weigh in on Market Sentiment
Jim Ritterbusch of Ritterbusch and Associates attributed the large product stock builds to an unexpected drop in demand. "The negative portion of the release was in the large product stock builds," he said, adding that this could be a sign of decreased fuel consumption.
Geopolitical Risks and Proposed Tariffs
Meanwhile, traders are also considering higher geopolitical risks and the potential impact of proposed tariffs on the U.S. economy. IG market analyst Tony Sycamore noted that tomorrow’s U.S. ISM manufacturing release will be crucial in determining the next move for crude oil prices.
WTI Crude’s Weekly Chart
Sycamore also observed that WTI crude’s weekly chart is entering a tighter range, suggesting that a significant price movement is imminent. "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 said.
Oil Prices Expected to Remain Constrained
A Reuters poll revealed that oil prices are likely to remain constrained near $70 a barrel in 2025. This prediction is based on weak Chinese demand and rising global supplies offsetting OPEC+ efforts to shore up the market.
European Developments
In Europe, Russia halted gas pipeline exports through Ukraine after the transit agreement expired on December 31. The European Union has arranged alternative supply arrangements ahead of this widely expected stoppage.
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Share Your Thoughts
What do you think about the current state of oil prices and market sentiment? Do you believe that President Xi Jinping’s pledge to promote growth in China will have a positive impact on fuel demand?
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