Oil Rises as China Factory Activity Trims Year-to-date Losses
Oil extended its year-end rally, gaining for a third day after factory activity expanded for three months in China, the world’s biggest crude importer.
Brent futures rose above $74 a barrel in London, trimming their decline for the year to 3.4%. China’s economy has shown tentative signs of recovery following a series of stimulus measures, even as the country faces the threat of a new trade war from the incoming Trump administration.
Crude has been stuck in a narrow trading range since mid-October, putting Brent on track for a second straight annual decline — though much smaller than last year — and leaving U.S. benchmark West Texas Intermediate little changed.
Bullish bets on WTI hit a four-month high in the final week of 2024 as investors braced for a potentially turbulent year ahead. Chinese President Xi Jinping said the country’s gross domestic product is expected to grow by about 5% for the full year of 2024, meeting an official target. However, President-elect Donald Trump has threatened tariffs on China, Canada and Mexico.
The oil market also faces a global glut by 2025, making it difficult for the Saudi-led OPEC+ alliance to revive stalled production. Some banks have forecast crude prices to continue to weaken over the next two years.
On the other hand, potential flare-ups in the Middle East or Ukraine could provide short-term support for oil. Trump’s pick for national security adviser has pledged to restore the “maximum pressure” campaign against Iran that squeezed the country’s crude exports during Trump’s first term. “I don’t fully believe in this extraordinary sluggishness,” said John Driscoll, director and founder of Singapore-based consultancy JTD Energy Services Pte. “We may still see some discipline on the upstream side of oil producers, and I wouldn’t rule out the possibility of unintended events like geopolitical events or extreme weather events.”
Source: Bloomberg
