Oil expands gains on optimism about policy support for growth, according to Reuters

By Florence Tan and Jacelyn Lear

SINGAPORE (Reuters) – Oil prices rose on Friday after closing at a more than two-month high in the previous session, as governments around the world stepped up policy support to stimulate economic growth that is boosting oil demand.

Futures were up 22 cents, or 0.3%, at $76.15 a barrel by 0420 GMT, after hitting their highest level since Oct. 25. U.S. West Texas Intermediate crude was up 25 cents, or 0.3 percent, at $73.38 a barrel, its highest close since Oct. 14 on Thursday.

Both contracts are on course for their second weekly advance after investors return from the holidays, which will improve trading.

Factory activity in Asia, Europe and the US ended on a soft note in 2024 as expectations for the new year grew due to Donald Trump’s return to the US presidency and growing trade concerns over China’s economic recovery.

“The December PMIS was a mixed bag for Asia, but we expect manufacturing activity and GDP growth in the region to continue in the near term,” Capital Economics analysts said in a note, citing purchasing managers’ indices data. Thursday.

“With growth struggling and inflation below target in most countries, we think central banks in Asia will continue to ease policy.”

Lower interest rates should stimulate more economic growth, which leads to higher oil consumption.

Investors are eyeing further interest rate cuts by the Federal Reserve this year to support the US economy, while Chinese President Xi Jinping has promised more proactive policies to boost growth.

“As China’s economic journey is poised to play a critical role in 2025, expectations for stronger consumption and oil demand growth in the coming months are tied to government stimulus measures.”

The market will soon look at crude oil prices coming from oil exporter Saudi Arabia. Saudi Arabia may raise crude prices to Asian buyers for the first time in three months in February, following last month’s gains in Middle East benchmark prices, traders said.

In the U.S., the world’s biggest oil consumer, gasoline and distillate inventories jumped last week as oil refineries ramped up output, despite oil demand at a two-year low. (EIA/S)

Crude inventories fell less than expected, falling 1.2 million barrels last week to 415.6 million barrels, while analysts expected a draw of 2.8 million barrels.

Traders will pay close attention to the latest weather forecasts as the expected cold spell in the US and Europe in the coming weeks could boost demand for diesel instead of heating.

Ahead of the January 20 start, investors are bracing for a Trump presidency.

“Trump’s tariffs on China and their impact on global demand patterns will be central to oil prices in 2025,” said Priyanka Sachdeva, market analyst at Philip Nova.