Oil prices rose on Tuesday, reversing the losses from the previous session, as a slightly positive market outlook for the short term helped buoy sentiment, despite thin trading volumes ahead of the Christmas holiday.
Brent crude futures gained 74 cents, or 1%, reaching $73.37 per barrel, while US West Texas Intermediate (WTI) crude futures also rose by 74 cents, or 1.1%, to $69.98 per barrel by 1400 GMT.
Analysts from FGE noted that they expect oil prices to fluctuate around current levels in the short term, as trading activity tends to decrease during the holiday season. Market participants are likely to remain on the sidelines until they have a clearer view of global oil balances for 2024 and 2025, the analysts added in a note.
The analysts also pointed to supportive supply and demand factors in December that have contributed to a less-bearish market outlook. “Given how short the paper market is on positioning, any supply disruption could lead to upward spikes in structure,” they warned.
Other analysts highlighted signs of rising oil demand in the coming months. Neil Crosby, assistant vice president of oil analytics at Sparta Commodities, said that major agencies are revising their outlook for 2025 oil balances. “The EIA’s short-term energy outlook (STEO) recently shifted their 2025 liquids to a draw, despite continuing to bring back some OPEC+ barrels next year,” Crosby explained.
A significant development supporting oil prices was China’s plan to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year as part of its fiscal stimulus to revive a struggling economy. This move is expected to provide near-term support for WTI crude, with some analysts suggesting it could help stabilize prices at around $67 per barrel, said OANDA senior market analyst Kelvin Wong.
In the US, the world’s largest oil consumer, markets are also watching economic data. Although consumer confidence weakened in December, new orders for key US-manufactured capital goods surged in November, driven by strong demand for machinery. Additionally, new home sales rebounded, suggesting that the US economy remains on solid footing as 2023 comes to a close.
As the year ends, oil prices are seeing mixed signals, but analysts remain cautiously optimistic about the market’s direction in the short term.
