Oil Extends Year-End Advance as China Factory Activity Expands

Oil prices have increased towards the end of the year, driven by a report that factory activity in China, the world's leading crude importer, has expanded for the third consecutive month. This positive trend in manufacturing signals signs of a recovering economy.

Market Developments in Oil Prices

Brent crude oil has risen for three sessions in a row, approaching $75 per barrel, while West Texas Intermediate (WTI) oil hovered around $72 per barrel. Recent stimulus measures initiated by China seem to be contributing to this recovery, even amidst the looming threat of a new trade conflict from the incoming U.S. presidential administration.

Potential Risks and Market Outlook

Despite this upward momentum, the oil market has experienced fluctuations in pricing and trading ranges since mid-October. While Brent crude oil is forecasted to end the year with a slight loss, WTI remains largely unchanged. Bullish sentiment has begun to rise, particularly towards the U.S. benchmark, as investors prepare for potential uncertainties in the upcoming year.

Concerns about oversupply in 2025 are also prominent, challenging OPEC and its allies in managing production levels effectively. Furthermore, President-elect Donald Trump has indicated that tariffs could be imposed on other nations, creating an environment of uncertainty and potential volatility.

Some analysts believe that despite a generally bearish outlook for crude prices over the next two years, geopolitical tensions or unexpected events could provide short-term support. John Driscoll, a director at JTD Energy Services, stated, "I’m not fully buying into this overwhelming bearishness. We may yet see some discipline on the upstream side from the oil producers." He also noted that unpredictable geopolitical events, or extreme weather conditions, could significantly impact the market.

Oil, China, Economy