SINGAPORE, Jan 2 (Reuters) – Oil prices inched higher on Thursday, marking the first trading day of 2025. Investors, returning from the holiday break, cautiously focused on China’s economic outlook and fuel demand, after President Xi Jinping pledged stronger efforts to boost growth.
By 0829 GMT, Brent crude futures rose 16 cents, or 0.21%, to $74.80 per barrel. This followed a 65-cent increase on Tuesday, the final trading day of 2024. U.S. West Texas Intermediate (WTI) crude also gained 16 cents, or 0.22%, reaching $71.88 per barrel after a 73-cent rise in the previous session.
On Tuesday, Xi Jinping had promised more proactive policies to stimulate China’s growth in 2025. This gave investors hope for stronger fuel demand from the world’s second-largest oil consumer.
Despite this, China’s factory activity in December grew at a slower pace than expected, according to the private-sector Caixin/S&P Global survey released on Thursday. This slowdown is raising concerns about the country’s trade prospects and potential risks from tariffs proposed by U.S. President-elect Donald Trump.
The report echoed an official survey from Tuesday, which showed minimal growth in China’s manufacturing sector in December. However, services and construction sectors showed signs of recovery. The data suggests that government stimulus measures are beginning to take effect, but China still faces risks from escalating trade tensions.
Tony Sycamore, an analyst at IG Markets, noted that traders are also factoring in higher geopolitical risks as they return to the market. “They are likely considering the impact of Trump’s economic policies, including the risks from potential tariffs,” Sycamore said.
Sycamore added that the U.S. ISM manufacturing data set to be released tomorrow will play a key role in determining the next move for crude oil prices. He observed that WTI’s weekly chart shows a tightening range, suggesting a major price move is imminent. “Rather than predicting the direction of the break, it might be better to wait and follow the trend once it happens,” he advised.
Investors are also awaiting delayed U.S. oil stockpile data, which was pushed back to Thursday due to the New Year holiday. Early forecasts suggest that U.S. crude oil and distillate stocks likely fell last week, while gasoline inventories are expected to have risen, according to an extended Reuters poll.
U.S. oil demand reached its highest level since the COVID-19 pandemic in October, hitting 21.01 million barrels per day (bpd), a 700,000-bpd increase from September, according to Energy Information Administration (EIA) data released on Tuesday. U.S. crude production also hit a record 13.46 million bpd in October, up 260,000 bpd from the previous month.
Looking ahead to 2025, oil prices are expected to remain capped near $70 per barrel. This marks a third consecutive year of decline, following a 3% drop in 2024. Weak Chinese demand and rising global oil supplies are expected to offset efforts by OPEC+ to stabilize the market, according to a Reuters monthly poll.
In Europe, Russia halted gas exports via pipelines running through Ukraine on New Year’s Day, a widely anticipated move. However, the shutdown is not expected to affect prices for European Union consumers, as many have arranged alternative supply routes. Hungary, in particular, will continue receiving Russian gas via the TurkStream pipeline under the Black Sea.
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