December 26 (Reuters) — Oil prices edged lower on Thursday amid thin holiday trading volumes, influenced by weak U.S. jobs data and a drop in natural gas futures. West Texas Intermediate (WTI) crude fell 0.7%, closing below $70 per barrel. U.S. natural gas futures dropped over 5%, further weighing on the energy sector as forecasts showed lower-than-expected heating demand.
The market was also impacted by a rise in U.S. unemployment claims, which hit their highest level in over three years. This dampened investor sentiment and halted a broader market rally, leading to additional pressure on oil prices. With trading volumes trending toward yearly lows, the lack of liquidity amplified downward price moves.
Natural Gas Futures Drag Down Energy Complex
Natural gas futures saw a significant decline on Thursday, falling by more than 5%. The drop was attributed to forecasts pointing to lower-than-anticipated demand for heating during the winter months. This weaker outlook contributed to a broader downturn in the energy complex, which includes oil and natural gas markets.
China’s Economic Moves Fail to Lift Oil Prices
Earlier in the session, oil prices had briefly gained momentum following reports that China was giving local officials more freedom to invest government bond proceeds. This news raised hopes of further economic support from Beijing. However, the rally lost steam as the energy market reacted to weak U.S. data and the ongoing natural gas slump.
API Report Offers Some Support for Oil Prices
Despite the broader market weakness, the American Petroleum Institute (API) reported a 3.2 million-barrel drop in U.S. commercial crude inventories last week. If confirmed by official data, this would mark the fifth consecutive weekly decline in crude stocks. Oil inventories typically fall in December before rising again in the early months of the new year, providing some support for prices.
Outlook for the Year-End and Beyond
Rebecca Babin, a senior energy trader at CIBC Private Wealth Group, noted that the oil market lacks significant momentum heading into 2024. “Traders are looking to January when Trump is inaugurated for the next catalyst. Until then, trading will likely be choppy,” she said.
Crude oil prices are set for a modest annual decline, having remained in a narrow range since mid-October. As traders look ahead to 2025, they are considering several key factors that could impact the market. These include potential changes in U.S. leadership under Donald Trump, ongoing efforts by Beijing to support its economy, and OPEC+ plans to gradually ease production curbs.
With these uncertainties in mind, market participants are bracing for a potentially volatile start to the new year.
