Oil prices edged higher on Wednesday as hopes for increased demand from China and anticipation of key economic reports in the United States buoyed the market. Brent crude futures rose 1.04% to $72.94 a barrel, while U.S. West Texas Intermediate (WTI) crude gained 1.09% to trade at $69.34. The optimism follows recent signals from Beijing that it will adopt an "appropriately loose" monetary policy in 2025 to spur economic growth.
China's announcement marks its first significant policy easing in 14 years, igniting speculation that the government may shift focus toward boosting consumer spending. "While past efforts have focused on sectors like electric vehicles and infrastructure, there are expectations that China may shift toward policies to boost consumer spending," said Li Xing Gan, financial markets strategist at Exness. Such policies could significantly increase China's oil demand, given its status as the world's top crude importer.
Data released earlier showed that Chinese crude imports rose annually for the first time in seven months, jumping more than 14% in November compared to the same period last year. This development further underscored the potential for rising energy consumption in the region.
Meanwhile, geopolitical factors also influenced the oil market. Reports surfaced that the Biden administration is considering stricter sanctions on Russia's oil trade, aiming to tighten restrictions on Moscow's revenue streams. According to Bloomberg, these measures could be implemented just weeks before Donald Trump assumes the presidency. Analysts like John Evans of oil brokerage PVM suggested that the current administration's actions might be an attempt to "run interference" ahead of potential policy shifts under Trump, who has indicated plans to pressure Ukraine into settling its conflict with Russia.
The Kremlin reacted sharply, accusing the U.S. of attempting to exacerbate tensions. The Biden administration appeared intent on leaving a difficult legacy for U.S.-Russia relations, according to Kremlin remarks. a Kremlin spokesperson remarked.
In the U.S., inventory data also played a role in shaping market sentiment. According to the American Petroleum Institute, crude oil stocks rose by 499,000 barrels for the week ending December 6, while gasoline inventories increased by 2.85 million barrels and distillate stocks grew by 2.45 million barrels. The U.S. Energy Information Administration (EIA) is expected to release its official inventory data later in the day, with analysts predicting a 900,000-barrel decline in crude stocks but a 1.7 million-barrel rise in gasoline supplies.
Broader economic factors added another layer of complexity. Market participants are closely watching U.S. inflation data and an upcoming Federal Reserve meeting, which could provide critical insights into the direction of monetary policy. Giovanni Staunovo, a commodity analyst at UBS Group AG, noted, Market observers suggested that the consumer price index figures for November are expected to influence market dynamics by shedding light on inflationary pressures and the Federal Reserve's potential response.
In addition, the Organization of the Petroleum Exporting Countries (OPEC) is set to release its monthly report on supply and demand, followed by a report from the International Energy Agency (IEA). These updates are expected to provide a clearer picture of global market conditions and future trends.
The U.S. Energy Information Administration has revised its earlier prediction of a surplus in the oil market. It now forecasts a slight deficit for 2025, a change that has caught some analysts by surprise. "The latest EIA report has caught some by surprise with a forecast of a mostly balanced oil market in 2025, versus some calling for a strongly oversupplied market," Staunovo added.
Despite these developments, the market remains within a relatively narrow trading range, influenced by both bullish and bearish factors. Middle East tensions, fluctuating inventory levels, and geopolitical maneuvers continue to shape market sentiment.
China's upcoming two-day economic work meeting is another focal point. During the event, Chinese leaders are expected to outline policies for the coming year, potentially providing more concrete signals about their economic and energy strategies. Although specific growth targets will not be revealed until March, the meeting is likely to emphasize measures aimed at stabilizing and invigorating the economy.
