Crude Oil Prices Rise on Chinese Stimulus Hopes Amid Global Tensions
February WTI crude oil (CLG25) is up +1.06 (+1.53%), and February RBOB gasoline (RBG25) is up +0.0335 (+1.72%).
China’s Plans for Economic Boost
Today, crude oil prices increased as markets reacted to potential economic stimulus in China. According to a report by Reuters, the nation may sell a record 3 trillion yuan ($411 billion) in special Treasury bonds in 2025 to support its economy.
Political Uncertainty Influences Oil Prices
Global political tensions continue to affect oil prices. Recently, President-Elect Trump threatened to take control of the Panama Canal if transit rates are not reduced, amidst various discussions regarding tariffs and sanctions.
On a more positive note, Congress averted a U.S. government shutdown by passing a temporary spending bill last Friday, which would have negatively impacted U.S. GDP growth and energy demand.
OPEC+ Production Quotas Provide Support
Crude oil prices gained support following Kazakhstan’s commitment to adhere to OPEC+ quotas. The country has abandoned plans to increase oil production by 190,000 barrels per day (bpd) next year.
Concerns about new sanctions on Iranian and Russian crude exports are raising the bullish outlook for oil prices. Mike Walz, selected by President-Elect Trump as national security adviser, has expressed intentions to reinstate “maximum pressure” on Iran. Meanwhile, the Biden administration is considering new sanctions on Russian crude exports.
Increase in Crude Oil Stored on Tankers
A rise in crude oil stored on tankers, reported by Vortexa, poses a bearish influence on oil prices. Crude oil held on stationary tankers increased by +7% week-over-week to 70.20 million barrels for the week ending December 20.
OPEC+ Adjusts Production Plans
Earlier this month, OPEC+ decided to push back a planned increase in crude production by +180,000 bpd from January to April, opting to ease output cuts at a slower pace. Additionally, the United Arab Emirates (UAE) announced a delay in raising its production target by 300,000 bpd until April. Initially, OPEC+ had aimed to restore 2.2 million bpd through monthly increments until late 2025, but this timeline has now shifted to September 2026. In November, OPEC’s output rose by +120,000 bpd to 27.02 million bpd.
Impact of the Ukraine-Russian Conflict
The ongoing conflict between Ukraine and Russia continues to support crude prices. Recently, Russia launched hypersonic missiles into Ukraine, and President Putin has made alarming statements regarding potential attacks on key targets in Kyiv, as well as updated nuclear policies that expand Russia’s conditions for using nuclear weapons.
Declining Demand and Russian Exports
Crude oil demand in China has weakened, which could lead to lower prices. Bloomberg data shows that China’s apparent oil demand in November dropped -2.14% year-over-year to 14.013 million bpd, with year-to-date demand down -3.26% y/y to 13.996 million bpd.
On the other hand, a decline in Russian crude exports offers some support for prices. According to Bloomberg’s weekly vessel-tracking data, Russian crude exports decreased by -170,000 bpd to 2.97 million bpd for the week ending December 15.
U.S. Crude Inventory and Production Trends
According to Wednesday’s EIA report, as of December 13, U.S. crude oil inventories were -5.9% below the seasonal five-year average, gasoline inventories were -3.3% lower, and distillate inventories were down -7.0% below the seasonal average. U.S. crude oil production for the week ending December 13 fell -0.2% week-over-week to 13.604 million bpd, slightly down from the previous record of 13.631 million bpd.
Active U.S. Oil Rigs
Baker Hughes reported that as of December 20, active U.S. oil rigs increased by one to 483, remaining modestly above the 2-3/4 year low of 477 rigs recorded last month. Over the past two years, the number of U.S. oil rigs has decreased significantly from a high of 627 rigs in December 2022.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
