Oil prices gained more than 1% on Tuesday, reversing the previous session’s losses. The rise came amid a more optimistic short-term outlook, fueled by expectations of slightly tightening oil supplies as trading activity slowed ahead of the Christmas and Hanukkah holidays.
Brent crude futures closed at $73.58, up by 95 cents, or 1.3%. U.S. West Texas Intermediate (WTI) crude futures settled at $70.10, marking an increase of 86 cents, or 1.2%.
Analysts at FGE predicted that prices would likely remain around current levels in the near term, as trading activity is expected to decrease during the holiday season. They noted that market participants are likely to stay on the sidelines until they gain a clearer understanding of global oil balances for 2024 and 2025.
“Supply and demand dynamics in December have contributed to a more balanced outlook,” FGE analysts stated in a note. “Given the limited positioning in the paper market, any disruptions to supply could trigger sharp price spikes.”
Further supporting the positive sentiment, some analysts pointed to signs of stronger oil demand in the coming months. Neil Crosby, Assistant Vice President of Oil Analytics at Sparta Commodities, noted that 2025 global oil supply projections are becoming more optimistic, with major agencies adjusting their forecasts.
“The U.S. Energy Information Administration (EIA) recently revised its 2025 outlook to reflect a potential supply draw, even as some OPEC+ barrels are expected to return next year,” Crosby said.
Market sources, citing figures from the American Petroleum Institute (API), reported that U.S. crude oil and distillate stocks fell by 3.2 million barrels and 2.5 million barrels, respectively, last week. Gasoline stocks, on the other hand, saw an increase of 3.9 million barrels. These figures are expected to be confirmed by the EIA in its weekly data release on Friday at 1 p.m. EST (1800 GMT).
In addition to these supply-side factors, China’s plan to issue 3 trillion yuan ($411 billion) worth of special treasury bonds next year is seen as a potential boost for global oil demand. As the world’s largest oil importer, China’s fiscal stimulus is expected to support oil prices, particularly WTI crude at around $67 per barrel, according to OANDA senior market analyst Kelvin Wong.
The market will also be monitoring the U.S. economy, which showed mixed data. While consumer confidence declined in December, orders for key U.S.-manufactured capital goods surged in November, driven by strong demand for machinery. Additionally, new home sales rebounded, signaling that the U.S. economy remains on solid footing as the year ends.
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