Oil Prices Supported by China’s Record Fiscal Stimulus
Oil prices rose in thin holiday trading, bolstered by China’s announcement of a record-breaking fiscal stimulus. Chinese authorities plan to issue 3 trillion yuan ($411 billion) in special treasury bonds next year to revitalize the slowing economy. Additionally, the government will increase pensions and medical insurance subsidies while expanding trade-ins for consumer goods.
These measures aim to stimulate domestic consumption, bolstering China’s role as the world’s largest oil importer. Analysts predict this will drive increased oil demand in the region, providing critical support for global prices.
US Crude Inventories Reflect Healthy Demand
Another factor lifting oil prices is the anticipated decline in US crude inventories. An extended Reuters poll projected a drop of 1.9 million barrels for the week ending Dec. 20, while gasoline and distillate inventories are expected to fall by 1.1 million and 0.3 million barrels, respectively.
Market sources reported crude and distillate stock reductions last week, citing figures from the American Petroleum Institute. Official data from the Energy Information Administration, due Friday, could provide additional confirmation of robust demand in the US energy market.
Impact of US and Global Production Trends
In the US, analysts anticipate increasing fossil fuel production under President-elect Donald Trump’s administration. This expectation of elevated output and consumption is contributing to a more optimistic outlook for crude prices.
Globally, Libya’s National Oil Corp (NOC) announced that its crude production in 2024 exceeded the target of 1.4 million barrels per day. Higher production in oil-exporting nations may temper price gains in the coming months, even as demand improves.
Near-Term Outlook for Oil Prices
Brent crude futures rose 0.3% to $73.80 per barrel, while US West Texas Intermediate crude climbed 0.3% to $70.34 per barrel in pre-holiday trading. Analysts like Priyanka Sachdeva of Phillip Nova attribute this uptick to the dual support from China’s fiscal measures and US inventory trends.
As 2024 ends, market dynamics suggest that oil prices could remain stable, provided demand holds strong and supply disruptions are minimized. However, potential oversupply from increased production could weigh on prices in 2025.