Oil Prices Rise on Chinese Manufacturing Data, Thin Trading Ahead of New Year
Oil prices rose in Asian trade on Tuesday, driven by a stronger-than-expected Chinese manufacturing activity reading, despite thin trading volumes ahead of the new year. At 21:05 ET, West Texas Intermediate (WTI) crude oil rose 0.7% to $74.51 a barrel, while Brent crude oil expiring in February jumped 0.7% to $71.05 a barrel.
Chinese manufacturing data showed that the sector expanded in December, but at a slower pace than expected, marking its third straight month of expansion. The data is significant for oil demand, as China is the world’s largest oil importer. The outlook for oil demand hinges on the hope that China can revive its economy, especially as there are concerns about a potential oversupply due to expected increases in production from non-OPEC countries.
Markets are awaiting more clarity on Beijing’s plans for stimulus measures in the coming year, with recent reports suggesting that the country will ramp up fiscal spending to support economic growth. The U.S. Institute for Supply Management (ISM) survey for December is also due out on Friday, providing clues about the strength of economic activity in the world’s largest energy consumer.
Despite the recent gains, oil prices are still heading for annual declines, with WTI set to slip nearly 1% and Brent on track to lose nearly 4%. Traders remain wary about China’s economic outlook and the possibility of oversupply in the months ahead. The International Energy Agency (IEA) has raised its demand forecast for next year, but maintained its projection that the oil market will remain adequately supplied.