Oil Prices Rise on Hopes for Chinese Stimulus and Inventory Decline

In a positive turn of events for the oil market, prices rose nearly 1% on Thursday amidst thin holiday trading. The driving force behind this increase was the optimism surrounding additional fiscal stimulus in China, the world’s largest oil importer. Furthermore, support came from an industry report indicating a decline in U.S. crude inventories.

Reports suggest that Chinese authorities have agreed to issue special treasury bonds worth 3 trillion yuan ($411 billion) next year. This move is part of Beijing’s efforts to boost its economy, which has been facing challenges in recent times.

Market Performance

Brent crude futures saw a rise of 0.7% to reach $74.06 a barrel, while U.S. West Texas Intermediate crude stood at $70.72, up 0.9%. Analysts like Giovanni Staunovo from UBS believe that the oil market remains undersupplied, which could provide further support for prices. Additionally, expectations of fiscal and monetary stimulus in China are also contributing to the positive sentiment.

The World Bank has raised its forecast for China’s economic growth in the coming years, despite acknowledging issues like subdued confidence and challenges in the property sector. Satoru Yoshida, a commodity analyst at Rakuten Securities, pointed out that the anticipation of increased production and demand under the upcoming U.S. administration is boosting oil prices.

Key Developments

Meanwhile, in Turkey, southbound traffic in the Bosphorus strait is set to resume after an earlier halt due to a tanker engine failure. The American Petroleum Institute’s latest report indicated a 3.2 million barrel decline in crude stocks last week, with the official Energy Information Administration report expected to confirm this trend on Friday.

Analysts are predicting a decrease of around 1.9 million barrels in crude inventories for the week ending December 20th. Gasoline and distillate inventories are also expected to show declines, further supporting the positive outlook for oil prices.

Overall, the combination of Chinese stimulus measures, declining U.S. inventories, and expectations of increased demand in the future are driving optimism in the oil market. Traders will be closely watching upcoming reports and developments to gauge the trajectory of oil prices in the coming weeks.