Oil Prices Steady Amid Weekly Gains, Weather, and Stimulus Expectations

Oil prices remained stable on Friday, with both Brent crude and U.S. West Texas Intermediate (WTI) poised for significant weekly gains. This momentum follows Thursday’s close, which marked the highest levels in over two months for both benchmarks, supported by colder weather in Europe and the U.S., as well as optimism about economic stimulus from China.

• Brent Crude: Down 9 cents at $75.84 per barrel by 12:12 GMT but set for a 2.2% weekly gain.
• WTI Crude: Dipped 6 cents to $73.07 per barrel, on track for a stronger 3.5% weekly rise.

Factors Driving the Market

China’s Economic Stimulus

Concerns about China’s economic fragility have raised expectations for government measures to bolster growth. This week, China announced:

1. Wage Increases: A surprise hike in wages for government workers.
2. Funding Boost: A sharp increase in ultra-long treasury bonds to support business investment and consumer spending.

“China’s economic trajectory is poised to play a pivotal role in 2025,” said Alex Hodes, an analyst at StoneX. “Hopes are pinned on government stimulus measures to drive increased consumption and bolster oil demand growth in the months ahead.”

Cold Weather Impact

Forecasts for colder weather in Europe and the U.S. have driven demand for heating oil, lending further support to crude prices.
“Oil demand is likely benefiting from cold temperatures across Europe and the U.S.,” noted UBS analyst Giovanni Staunovo.

U.S. Inventory Data

The Energy Information Administration (EIA) reported:

• A 1.2 million barrel drop in U.S. crude stockpiles, bringing the total to 415.6 million barrels.
• Increased gasoline and distillate inventories, as refineries boosted output. However, fuel demand hit a two-year low, tempering some of the bullish momentum.

Outlook

Oil markets are reflecting a blend of optimism and caution as 2025 begins. While colder weather and China’s stimulus measures provide immediate support, weak demand signals from U.S. fuel consumption could weigh on further gains. Still, with China’s policies expected to influence global demand significantly, market watchers are keeping a close eye on Beijing’s next steps.

Brent and WTI’s strong weekly performance suggests a resilient market sentiment, with further movements likely dictated by macroeconomic developments and weather-driven demand.