Oil Prices Surge Towards Weekly Gains Amid China Stimulus Optimism!

LONDON (Reuters) - Oil prices experienced a nearly 1% increase on Friday, positioning themselves for a weekly gain driven by hopes of a stimulus-enhanced economic recovery in China—the largest oil importer globally. Forecasts suggesting a reduction in U.S. crude inventories have further fueled this upward trend.

According to analysts surveyed by Reuters, U.S. crude stocks were anticipated to decline by around 1.9 million barrels last week, with the American Petroleum Institute later estimating a more significant reduction of 3.2 million barrels. This drop comes as U.S. domestic demand remains resilient amidst evolving market conditions.

As of 1105 GMT, Brent crude futures rose by 60 cents, or 0.8%, climbing to $73.86 a barrel. Meanwhile, U.S. West Texas Intermediate crude also saw an uptick, gaining 57 cents (0.8%) to reach $70.19. For the week, Brent is poised for an impressive gain of 1.3%, while WTI stands at a 1% increase—indicative of a positive trend in oil market stability.

UBS analyst Giovanni Staunovo commented, “We are likely experiencing a rebound in anticipation of a crude draw in the U.S. Additionally, colder weather may soon add support for oil demand.” This assertion comes just before the U.S. Energy Information Administration is set to release its official weekly inventory report, slightly delayed due to the holiday season.

Optimism regarding China's economic growth and its subsequent oil demand gained strength on Thursday when the World Bank raised its growth forecasts for China for 2024 and 2025. However, the institution cautioned that ongoing subdued household and business confidence may continue to present challenges for the economy next year.

In a proactive move to stimulate its faltering economy, Chinese authorities have reportedly agreed to issue special treasury bonds totaling 3 trillion yuan ($411 billion) next year. This fiscal measure is expected to infuse much-needed liquidity into the market.

Yet, the gains in oil prices face a tightening grip from the strengthening U.S. dollar, which is buoyed by widespread expectations surrounding the upcoming economic policies of the new administration. A robust dollar generally makes oil purchases more expensive for buyers using other currencies, consequently tempering price increases.

As we move forward, all eyes will be on the U.S. inventory report and further developments in China’s economic stimulus plans, which could have significant ramifications for global oil prices. Stay tuned for more updates on this evolving story!