Oil prices increased on Tuesday, reversing the losses from the previous session. This rise was driven by a somewhat positive market outlook for the short term, despite thin trading activity ahead of the Christmas holiday. Brent crude futures climbed by 42 cents, or 0.6%, reaching $73.05 a barrel, while U.S. West Texas Intermediate crude futures rose by 38 cents, also 0.6%, to $69.62 a barrel as of 0742 GMT.
Analysts at FGE expect benchmark prices to fluctuate around current levels in the short term. They note that activity in the paper markets typically decreases during the holiday season, leading market participants to remain on the sidelines until they gain a clearer understanding of global oil balances for 2024 and 2025.
According to the analysts, changes in supply and demand throughout December have supported their less-bearish outlook. They explained, “Given how short the paper market is on positioning, any supply disruption could lead to upward spikes in price.” Other analysts have also pointed to encouraging signs for oil prices in the coming months.
Neil Crosby, assistant vice president of oil analytics at Sparta Commodities, remarked, “The year is ending with the consensus from major agencies indicating that 2025 liquids balances are beginning to break down.” He noted that the EIA’s short-term energy outlook recently projected a draw in 2025 liquids, despite the expectation of more OPEC+ barrels returning next year.
Additionally, China, the world’s largest oil importer, plans to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year as part of its efforts to ramp up fiscal stimulus and revive a faltering economy. This development is likely to provide near-term support for WTI crude at $67 a barrel, according to OANDA senior market analyst Kelvin Wong. Markets will also monitor the economic conditions in the United States, the world’s largest oil consumer, which recently released a mixed bag of economic data.
On a positive note, new orders for key U.S.-manufactured capital goods surged in November due to strong machinery demand, and new home sales rebounded. This suggests that the U.S. economy is on solid footing as the year comes to a close.
About Author
