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Market Performance
Oil prices increased slightly in thin holiday trading on Thursday, buoyed by optimism surrounding China’s fiscal stimulus and an anticipated drop in U.S. crude oil inventories.
- Brent Crude Futures: Rose 13 cents, or 0.2%, to $73.71 per barrel by 0650 GMT.
- West Texas Intermediate (WTI) Crude: Gained 11 cents, or 0.2%, to $70.21 per barrel.
Key Drivers of the Oil Market
- China’s Fiscal Stimulus:
- The Chinese government plans to ramp up fiscal support in 2024 to revive its faltering economy.
- Measures include increased pensions, higher medical insurance subsidies, and expanded trade-in programs for consumer goods.
- Beijing also announced plans to issue 3 trillion yuan ($411 billion) in special treasury bonds next year to boost economic activity.
- Priyanka Sachdeva, senior market analyst at Phillip Nova, highlighted that this record-breaking fiscal stimulus is a significant factor driving crude oil prices higher.
- Decline in U.S. Crude Inventories:
- A Reuters poll anticipates a 1.9 million barrel decline in U.S. crude inventories for the week ending Dec. 20.
- Gasoline and distillate inventories are also projected to fall by 1.1 million barrels and 0.3 million barrels, respectively.
- The American Petroleum Institute reported declines in crude and distillate stocks earlier in the week, with official Energy Information Administration (EIA) data expected on Friday at 1 p.m. EST.
- Global Demand and Supply Dynamics:
- Expectations of higher fossil fuel production and demand following the inauguration of U.S. President-elect Donald Trump have bolstered sentiment in the oil markets.
- Libya’s National Oil Corporation (NOC) reported exceeding its 2024 production target of 1.4 million barrels per day, adding to the supply side dynamics.
Analyst Perspectives
- Priyanka Sachdeva (Phillip Nova): Highlighted the dual impact of Chinese fiscal stimulus and falling U.S. inventories as key factors supporting oil prices.
- Satoru Yoshida (Rakuten Securities): Pointed to increased optimism around fossil fuel production and demand under the incoming U.S. administration as a contributing factor.
Outlook
Oil prices remain supported by improving demand fundamentals, particularly from China, the world’s largest oil importer. However, the market will closely monitor supply-side developments, such as Libya’s robust production levels, and U.S. inventory data from the EIA to gauge near-term price trends.
While optimism around fiscal stimulus in China provides upward momentum, global macroeconomic uncertainties and potential shifts in production policies could temper further gains.
