Crude Oil Prices Rise Amid Global Tensions and Economic Stimulus Hopes
February WTI crude oil (CLG25) on Tuesday closed up +0.86 (+1.24%), while February RBOB gasoline (RBG25) increased by +0.0225 (+1.16%).
China’s Economic Plans Boost Market Confidence
Crude oil prices climbed on Tuesday, driven by expectations of a significant economic stimulus from China. A recent Reuters report indicated that China may issue a record 3 trillion yuan ($411 billion) of special Treasury bonds in 2025 to support its economy.
Geopolitical Uncertainty Influences Market Stability
Political tensions concerning the Panama Canal have contributed to the fluctuating oil prices. President-Elect Trump warned of potential actions against the canal unless transit rates improve. This adds to his previous threats regarding tariffs and sanctions.
Meanwhile, Congress successfully avoided a government shutdown last Friday by passing a stop-gap spending bill. A shutdown could have negatively impacted U.S. GDP growth and energy demand.
OPEC+ Decisions Impact Production Levels
Support for crude prices also emerged from Kazakhstan’s commitment to adhere to OPEC+ quotas, halting plans to increase oil production by 190,000 barrels per day (bpd) in the coming year.
The looming prospect of new sanctions on Iranian and Russian crude exports may tighten global oil supplies, potentially driving prices upward. Mike Walz, Trump’s national security adviser choice, reiterated a strategy of “maximum pressure” on Iran, while the Biden administration is assessing new sanctions on Russian crude oil.
Rising Oil Stocks Create Market Concern
Despite this positive outlook, an increase in worldwide crude oil held on tankers poses a bearish signal for oil prices. Vortexa reported a 7% rise in crude oil stored on stationary tankers, reaching 70.20 million barrels for the week ending December 20.
OPEC+ Strategy Adjustments and Production Increases
Earlier this month, OPEC+ postponed a planned production hike of 180,000 bpd from January to April and announced a slower unwinding of output cuts. The UAE has also delayed its planned increase of 300,000 bpd from January to April. OPEC+ now plans to restore 2.2 million bpd in gradual increments until September 2026; the prior target was late 2025. In November, OPEC’s crude production rose by 120,000 bpd to reach 27.02 million bpd.
Global Conflicts and Their Effects on Prices
The continuing Ukraine-Russian conflict has also supported crude prices. Recent missile launches and aggressive rhetoric from Russian President Putin, including threats to target key decision-making areas in Ukraine, raise concerns about escalating hostilities.
Decreasing Demand from China Affects Market Dynamics
On the contrary, weakening crude oil demand from China remains a concern for prices. Data from Bloomberg shows that apparent oil demand in November declined by 2.14% year-on-year to 14.013 million bpd. For the January-November period, a decrease of 3.26% was recorded, with demand at 13.996 million bpd. As the second-largest crude consumer globally, this dip significantly impacts global pricing.
Russian Export Decline and U.S. Inventory Levels
However, a drop in Russian crude exports offers some support to prices. Weekly data from Bloomberg revealed a reduction of 170,000 bpd in Russian exports, bringing the total down to 2.97 million bpd as of December 15.
The latest EIA report highlighted that as of December 13, U.S. crude oil inventories were 5.9% below the five-year seasonal average, gasoline inventories were down 3.3%, and distillate inventories were 7.0% below average. U.S. crude oil production fell slightly to 13.604 million bpd for the week ending December 13, down 0.2% from the previous week’s record.
Trends in U.S. Oil Rig Activity
Baker Hughes reported an increase in active U.S. oil rigs, rising by one to a total of 483 rigs for the week ending December 20. This figure remains modestly above the 2-3/4 year low of 477 rigs recorded last month. In the past two years, the number of U.S. oil rigs has decreased 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 are for informational purposes only. For more information please view the Barchart Disclosure Policy
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
