Crude oil futures could see better prospects as traders return from the holiday break, focusing on a potential recovery in China’s economy and fuel demand.
That’s what Terence Hove, Financial Markets Strategist Consultant to Exness, said in a market analysis sent to Rigzone on Thursday, adding that “President Xi Jinping’s pledge to implement growth supportive policies in 2025 has prompted market participants to assess the broader economic outlook”.
“With China being the world’s largest oil importer, a recovery in its economy could provide support to global crude prices by driving increased demand. However, U.S. trade policies under President-elect Donald Trump could introduce volatility, potentially weighing on prices,” Hove added.
In the analysis, Hove said recent economic data from China showed mixed signals, “with factory activity growing at a slower pace than anticipated in December, raising concerns about the broader economic outlook and risks associated with U.S. tariffs”.
“While this could weigh on global crude prices by limiting the pace of demand recovery, a rebound in services and construction sectors indicates that policy stimulus is starting to take effect, providing some support,” Hove noted.
“The balance between these factors will be key in determining the strength of the economic recovery and its impact on crude demand,” he highlighted.
Hove also pointed out in the analysis that, in the U.S., “oil demand surged to its highest levels since the pandemic in October, while crude output reached record highs”.
“Despite this, oil prices are expected to remain constrained in the short term, as increasing global supply may counteract efforts by OPEC+ to stabilize the market,” he added.
Rigzone has contacted the Trump transition team, the Chinese government, and OPEC for comment on Hove’s statement. At the time of writing, none have responded to Rigzone’s request yet.
In a separate market analysis sent to Rigzone this morning, Antonio Di Giacomo, a senior market analyst at XS.com, noted that the price of West Texas Intermediate (WTI) crude oil saw a slight increase at the start of 2025.
“This bullish movement marked the beginning of a year with optimistic prospects for the oil market, driven by economic and geopolitical factors,” Di Giacomo stated in the analysis.
“The optimism surrounding China’s economy, the world’s largest crude importer, is a key factor behind this uptrend. President Xi Jinping’s statements promising more proactive policies to stimulate growth have raised expectations of increased energy demand,” he added.
“While recent data indicates marginal growth in the country’s manufacturing activity, sectors such as services and construction have started showing signs of recovery, suggesting a gradual strengthening of China’s economy,” he continued.
In the analysis, Di Giacomo also noted that crude inventories in the United States have played a significant role in price movements.
“During the last week of December, a decline in crude and distillate stocks was reported, reflecting robust consumption,” he said.
“However, gasoline inventories rose, indicating a potential adjustment in consumption patterns. These inventory fluctuations highlight the market’s complexity and sensitivity to supply and demand conditions,” he added.
The U.S. Energy Information Administration’s (EIA) latest weekly petroleum status report at the time of writing, which was released on December 27 and included data for the week ending December 20, showed that crude oil stocks, excluding the Strategic Petroleum Reserve, dropped from 421.0 million barrels on December 13 to 416.8 million barrels on December 20.
Distillate fuel oil stocks decreased from 118.2 million barrels on December 13 to 116.5 million barrels on December 20, the report showed. Motor gasoline inventories rose from 222.0 million barrels on December 13 to 223.7 million barrels on December 20, the report revealed.
“According to data published by the EIA on Tuesday, U.S. crude demand reached levels unseen since before the pandemic, hitting 21.01 million barrels per day in October,” Di Giacomo said in the analysis.
“This increase underscores the country’s economic recovery and its impact on the global energy market,” Di Giacomo highlighted.
“Additionally, U.S. crude production hit a record high of 13.46 million barrels per day, demonstrating the country’s ability to meet rising domestic and international demand,” he went on to state.
A table showing U.S. daily average supply and disposition of crude oil and petroleum products for October, included in the EIA’s latest petroleum supply monthly report released on Tuesday, outlined that products supplied for that month came in at 21.01 million barrels per day. Field production of crude oil came in at 13.457 million barrels per day in October, the table highlighted.
Focusing on the “international front” in the analysis, Di Giacomo said OPEC and its allies “face the challenge of balancing the market”.
“Despite efforts to control supply, increasing global production could cap price gains. Moreover, moderate demand, particularly from China, raises questions about how the market will evolve in the medium term,” he added.
Di Giacomo warned in the analysis that “while WTI crude prices have started the year positively, many analysts predict that prices could remain around $70 per barrel throughout 2025”.
“This reflects a stabilization trend following the declines seen in recent years. Market players remain attentive to global economic developments, the energy policies of major producers, and supply-demand dynamics,” he added.
Rigzone has contacted the Chinese government and OPEC for comment on Di Giacomo’s statement. At the time of writing, neither have responded to Rigzone’s request yet.
In its latest short term energy outlook (STEO), which was released last month, the EIA lowered its Brent and WTI spot price forecasts for 2024 and 2025.
According to its December STEO, the EIA now sees the Brent spot price averaging $80.49 per barrel in 2024 and $73.58 per barrel in 2025. The EIA’s previous STEO, which was released in November, projected that the Brent spot price would average $80.95 per barrel this year and $76.06 per barrel next year.
The EIA’s December STEO forecast that the WTI spot price will average $76.51 per barrel in 2024 and $69.12 per barrel in 2025. Its November STEO projected that the WTI spot price would average $77 per barrel in 2024 and $71.60 per barrel in 2025.
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