Oil Prices Rebound on U.S, China Demand Expectations
Oil prices edged higher on Thursday on a positive demand outlook in China and the U.S., the world’s two largest oil consumers. Brent climbed to $72.64 per barrel on Thursday while the US benchmark West Texas Intermediate also increased to $69.49 per barrel.
On Wednesday, crude oil prices edged lower, with WTI closing below $70 per barrel while ICE Brent settled below $73 per barrel. The oil market witnessed a second straight session of decline as the strengthening dollar weighs on the complex.
Brent has shed more than 5% so far this year, setting up a second consecutive annual loss as a faltering Chinese economy weighed heavily on crude oil demand. However, China Petrochemical Corp., or Sinopec, expects China’s petroleum consumption to peak by 2027 at no more than 800 million metric tonnes, or 16 million barrels per day, the state energy group said in an outlook released on Thursday.
In terms of production, China’s crude oil output is expected to reach 215 million tons in 2025, while its oil refining capacity will be between 960 million and 970 million tonnes per annum.
Sinopec also says China’s natural gas consumption may peak earlier, but at a higher level than it forecast last year. According to JPMorgan, the global oil market will shift from a balance in 2024 to a large surplus of 1.2 million barrels a day next year, followed by another surplus of 0.9 million b/d in 2026.
The latest data from Insights Global shows that refined product inventories in the Amsterdam-Rotterdam-Antwerp (ARA) region increased by just 16kt over the week to 6.3 mt. ING says in a note.
The US Federal Reserve on Wednesday cut the benchmark policy rate by 25 basis points to the range of 4.25%-4.50%, as widely expected. Increased economic activity spurred by lower interest rates is anticipated to further boost oil demand and in turn support higher oil prices.
While the economy continues to grow at a steady pace, labor market conditions have eased. Unemployment, while still low, has ticked up slightly, the bank said in a statement.
Future rate adjustments will depend on incoming data and evolving economic conditions, it added. During his speech following the bank’s decision, Federal Reserve Chair Jerome Powell said that for 2025, the bank will be’more cautious’ in deciding future interest rate cuts.
‘We have reduced our policy rate by a total of 100 basis points from its peak level, and our policy stance is now significantly less restrictive. We may therefore be more cautious when considering further adjustments to our policy rate,’ Powell said.
Analysts look to today’s growth data and Friday’s core personal consumption expenditures price index data for further cues on economic growth in the US. The US Energy Information Administration (EIA) reported a drawdown in US commercial crude oil inventories for the week ending Dec. 13, bolstering oil price increase.
US commercial crude oil inventories decreased by 900,000 barrels to 421 million barrels, according to data released by the EIA late Wednesday. The drop in stocks suggests strengthening demand in the US, the world’s largest oil consumer.
Meanwhile, US natural gas prices moved higher for a fourth consecutive session as weekly inventory numbers reported outflows, while expectations of a cold start to January raised hopes for increased consumption of the heating fuel.
The weekly data shows that US gas storage decreased by 125 BCF last week, slightly lower than the 127 BCF increase the market was expecting.
However, this was well above the five-year average decline of 92Bcf. Total gas stockpiles totalled 3.62 TCF as of 13 December, which is just 0.6% above last year and 3.8% above the five-year average.
