Oil prices are rising as hopes grow for government policies to boost economic growth and fuel demand
SINGAPORE: Oil prices are on the rise, hitting their highest levels in over two months. This surge is fueled by optimism that governments worldwide might step up their support to boost economic growth, which in turn could increase fuel demand.
Brent crude futures went up by 16 cents, reaching $76.09 a barrel. Meanwhile, U.S. West Texas Intermediate crude rose by 19 cents to $73.32 a barrel. Both contracts are set for their second weekly increase as investors return from holidays, making trading more active.
However, factory activity in Asia, Europe, and the U.S. ended 2024 on a low note. Concerns about trade risks and a shaky economic recovery in China have dampened expectations for the new year.
Analysts from Capital Economics noted that while December’s purchasing managers’ indexes showed mixed results, they expect manufacturing and GDP growth in Asia to remain weak for now. They believe that with growth struggling and inflation low, central banks in Asia will likely continue to ease their policies.
Lower interest rates could help stimulate economic growth, leading to higher fuel consumption. Investors are particularly focused on potential interest rate cuts by the U.S. Federal Reserve this year to support the economy. Additionally, China’s President Xi Jinping has promised more proactive measures to promote growth.
As China’s economic path is crucial for 2025, there’s hope that government stimulus will boost consumption and oil demand in the coming months. In the U.S., gasoline and distillate inventories rose last week as refineries increased output, but fuel demand has hit a two-year low.
Crude stockpiles fell, but not as much as analysts expected. Traders are also keeping an eye on weather forecasts, as a cold snap in the U.S. and Europe could increase demand for diesel as a heating alternative.
