Crude extends retreat ahead of US rate decision
Quantum Commodity Intelligence – Crude oil futures opened the new year higher as benchmarks looked to extend the positive finish to 2024, driven by colder weather in the US and Europe.
Front-month Mar25 ICE Brent futures were trading at $76.25/b (1630 GMT) versus Tuesday’s settle of $74.64/b, while the Mar25/Apr25 spread was valued close to $0.50/b, up $0.10/b on the previous close.
At the same time Feb25 NYMEX WTI was trading at $73.42/b, versus the pre-holiday close of $71.72/b, as both benchmarks registered fresh multi-week highs.
The final days of 2024 ended on a positive note as both crude markers gained around $3/b in the last decade of December.
Much of that optimism stemmed from renewed hopes that China would get back on track after Beijing pledged several stimulus measures to boost economic activity.
President Xi Jinping said this week China’s economy is on course to expand by 5% in 2024, in line with official growth targets, while playing down concerns that the incoming Trump administration will harm Beijing’s prospects via a slew of tariffs.
Xi said China’s economy was “overall stable and progressing,” adding that risks in key economic sectors had been effectively addressed.
However, most analysts expect China to face a bumpy ride given the prospect of trade restrictions, while the ailing property sector remains a drag on the broader economy.
Meanwhile, China’s factory activity grew in December, albeit at a slower-than-expected pace, according to a Caixin/S&P Global manufacturing survey.
The PMI index eased to 50.5 in December from 51.5 the previous month, also missing analysts’ forecasts from a Reuters poll of 51.7, as overall sales were dampened by a dip in export orders amid concerns over the international trade outlook.
Weather
The energy sector was also given a boost as forecasters predicted a sharp drop in temperatures for January.
Oil investors will also be keeping a watchful eye on natural gas prices, which led the end-year rally as both US and European benchmarks posted 2024 highs.
Markets also found support from expected production discipline versus OPEC+ quotas, which dovetails with the delay in planned output hikes by the group.
The incoming Trump administration is also expected to move on tightening sanctions aimed at Iran and possibly Venezuela, adding to the recent US and European clampdown on Russia’s shadow shipping fleet.
However, oil faces headwinds from the surging US dollar, making imports more expensive for non-dollar economies.
“The US Dollar Index gained more than 2.5% in December and closed the third consecutive month in positive territory. The index stays in a consolidation phase slightly below the 26-month top it touched above 108.50 on the last day of 2024,” said Eren Sengezer of FXStreet.
Meanwhile, EIA data revealed a modest drop in crude stockpiles, which was offset by a sharp rise in gasoline stocks.
