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Crude oil prices were heading towards a weekly gain earlier today following an update from the World Bank on the growth prospects of the Chinese economy next year.
Brent crude was trading at $73.18 per barrel at the time of writing, with West Texas Intermediate at $69.58 per barrel, after the World Bank revised upwards its GDP forecast for China for both this year and next. China itself issued an upward revision of its 2023 GDP growth, and it was a sizable revision, at 2.7%, which may have also helped fuel optimism about demand.
Separately, the American Petroleum Institute’s latest weekly oil inventory estimate suggested a solid draw at 3.2 million barrels, a further sign of strong demand for the commodity in its biggest market. The Energy Information Administration’s estimate of weekly crude oil inventory changes is due out today, with a two-day delay due to the Christmas holidays.
The benchmarks are set for a modest loss on an annual basis, however, largely due to the oversized focus on Chinese demand and persistent though unjustified expectations that OEPC+ would start bringing oil back to the market whatever the price level. OPEC+ did not start bringing oil back, acutely aware of prices, but this did not prevent traders from making bearish bets on expectations to that effect.
The annual decline in prices could also partially be attributed to the fact that the war in the Middle East failed to cause any disruption in oil supply despite several escalation events that could have resulted in just that. Yet when an exchange of missile strikes between Iran and Israel failed to ignite the region, traders rightly concluded no one in the Middle East wanted an oil supply disruption. This effectively put a cap on prices.
“The oil market is set to see fairly modest demand growth once again in 2025, which is partly cyclical and partly structural,” ING commodity analysts Warren Patterson and Ewa Manthey said in a new 2025 outlook. “In addition, we see another year of strong non-OPEC supply growth while OPEC still sits on a significant amount of spare production capacity, which should continue to provide comfort to the market.”
