Oil prices rose on Tuesday after data showed China’s manufacturing activity expanded in December but was set to close lower for a second year amid demand concerns in major consumer nations.
Brent crude futures rose 60 cents, or 0.8%, to $74.59 a barrel by 0530 GMT. WTI crude oil rose 62 cents, or 0.9%, to $71.61 a barrel.
Brent fell 3.2% for the year, while WTI fell 0.1%.
Chinese authorities have agreed to issue a record 3 trillion yuan ($411 billion) worth of special treasury bonds in 2025 to boost economic growth.
An official factory survey on Tuesday showed that China’s production activity rose for a third straight month in December, boosted by stimulus, supporting the economy, but at a slower pace.
The weaker demand outlook in China has forced both the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to lower their oil demand expectations in 2025.
OPEC and its allies postponed plans to increase production to April 2025 amid falling prices earlier this month. The IEA expects global oil supplies to exceed demand in 2025, even if OPEC+ cuts remain in place, as rising output from the United States and other foreign producers outpaces sluggish demand.
The weaker long-term demand outlook weighs on prices but is likely to find short-term support from declining U.S. crude inventories, which are expected to fall by about 3 million barrels last week.
Both Brent and WTI were supported by a larger-than-expected drawdown in U.S. crude inventories in the week ending Dec. 20, as refiners ramped up operations and the holiday season boosted fuel demand.
Investors’ focus next year will be on the Fed’s interest rate policy after the central bank earlier this month predicted just two rate cuts, compared with four in September due to persistently high inflation.
Low interest rates typically encourage borrowing and boost growth, which should boost oil demand.
Expectations about U.S. interest rates and widening interest rate differentials between the U.S. and other economies have lifted the dollar and weighed on other currencies. A stronger dollar is making oil more expensive for consumers outside the U.S., weighing on demand.
Markets are also bracing for Trump’s looser regulations, tax cuts, tariff hikes, and tighter immigration policies that are expected to both boost growth and boost inflation, ultimately being positive for the dollar.
