Oil prices started the 2025 trading year higher in Asia on Thursday as market sentiment turned positive on expectations of stronger economic growth and oil demand.
Oil prices have been in a narrow range for most of the fourth quarter amid concerns about demand in China and other major economies and expectations of oversupply this year. In 2024, oil experienced an annual decline for the second year in a row, falling by about 3% compared to the last closing price of 2023.
On Thursday, the first trading day of 2025, oil rose half a percent in Asian trade as the market digested signals that China would introduce additional measures to boost its economic growth this year.
US West Texas Intermediate crude was trading 0.43% higher at $72.04 in early Asian trade. Brent crude, the international benchmark, was up 0.42% at $74.97 a barrel.
Chinese President Xi Jinping said in his New Year’s address that China will take more proactive measures to boost economic growth in 2025. In a separate speech, Xi also suggested that China achieve the official economic growth target for 2024 of 5%. Official oil consumption data from the U.S. also boosted positive market sentiment.
Earlier this week, data from the Energy Information Administration showed that total oil demand in America stood at 21.01 million barrels per day in October 2024. This was the highest volume of total crude oil and petroleum products supplied – a demand agent – since the pandemic, and an increase of about 700,000 barrels per day compared to September 2024.
In a note on oil prices, quoted by the Wall Street Journal, Axis Securities says: “With a balance between supply discipline and economic recovery, crude oil prices are poised for a potential recovery, driven by geopolitical and economic factors.”
UK stock markets rise on mining and oil
British stock markets rose on Thursday thanks to decent gains from mining and oil stocks, as investors largely shrugged off a barrage of weak economic data with very little institutional news to focus on.
Commodity prices rose across the board, with higher oil, gold, silver and iron ore prices, supporting share prices of London-listed producers.
After a hesitant start, the FTSE 100 was up 0.3% at 8,198 by lunchtime, rising for the fifth time in six sessions and trading at its highest level since December 18.
Many festive holidays have meant that there hasn’t been much to guide market sentiment over the past week or so. While the corporate earnings calendar remains calm, things have improved in terms of economic data.
Weak data from China did little to dampen mining stocks early on, although the Caixin manufacturing PMI unexpectedly fell to 50.5 from a five-month high of 51.5 in November (consensus: 51.7). The survey showed that growth in new orders slowed on the back of “weak external demand.”
Ross Mulld, investment director at AJ Bell, said it was “somewhat puzzling” to see mining stocks performing well on Thursday. “China is an important player in the global commodity market, and negative economic data usually cast a dark shadow over the mining sector for fear of weaker demand for metals. The jump in mining stocks […] was affected by the weaker pound against the US dollar.”
In the UK, the S&P global manufacturing PMI for December was revised to an 11-month low of 47.0, down from 48.0 in November and below the preliminary estimate of 47.3 released two weeks ago.
The Eurozone S&P Global/HCOB manufacturing PMI for December revised to 45.1 from 45.2, marking the 30th consecutive reading below 50
Oil prices rise on China’s growth optimism
Oil prices rose on Thursday as investors returned to the first trading day of the new year with an upbeat outlook on China’s economy and fuel demand after President Xi Jinping pledged to boost growth.
Brent crude futures were up $1.04, or 1.39%, at $75.68 a barrel by 1205 GMT after gaining 65 cents on Tuesday, the last trading day of 2024. U.S. West Texas Intermediate crude rose $1.02, or 1.42%, to $72.74.
In his New Year’s address on Tuesday, Xi said China will implement more proactive policies to boost growth in 2025. A Caixin/S&P Global survey on Thursday showed factory activity in China grew in December, but at a slower-than-expected pace in the face of concerns about how Trump-proposed tariffs will affect trade prospects.
The data reflected an official survey released on Tuesday, which showed that manufacturing activity in China barely grew in December. However, services and construction have performed better, with data suggesting that political stimulus is seeping into some sectors.
Some analysts see weaker Chinese data as positive for oil prices as it could prompt Beijing to accelerate its stimulus program.
IG market analyst Tony Sycamore said traders are returning to their desks and may weigh the higher geopolitical risks and Trump, who is aggressively running the U.S. economy against the expected impact of tariffs. “The release of the US manufacturing index ISM tomorrow will be key to the next step for crude oil,” Sycamore said.
Robert Gardner, chief economist at Nationwide, stated that the housing market “ended 2024 on a strong footing.” However, he predicts volatility in the coming months due to upcoming stamp tax changes, which “will make it difficult to discern the underlying strength of the market.”
