Crude oil futures opened the new year on a slightly higher note, as markets looked to consolidate the positive momentum from the close of 2024. Both benchmarks, ICE Brent and NYMEX WTI, showed modest price increases, reflecting renewed optimism in the market.
As of 0810 GMT, March 2025 ICE Brent futures were trading at $74.94/b, up from Tuesday’s close of $74.64/b. Meanwhile, March 2025/April 2025 spread was valued at approximately $0.40/b.
In parallel, February 2025 NYMEX WTI futures traded at $71.95/b, a slight gain from the pre-holiday close of $71.72/b.
A Strong Finish to 2024
The final days of 2024 saw both major crude markers surge by nearly $3/b in the last ten days of December. Much of this optimism was driven by expectations of stronger demand from China, spurred by the country’s pledges to implement stimulus measures aimed at boosting its economy.
President Xi Jinping recently stated that China’s economy is on course to grow by 5% in 2025, aligning with official growth targets. This announcement helped ease concerns about trade restrictions and tariffs that might come with the incoming Trump administration. Xi assured that the economy was “overall stable and progressing,” and that risks in key economic sectors had been effectively managed.
Despite this optimism, analysts remain cautious, pointing out that China’s economy still faces challenges, including potential trade restrictions and the struggling property sector.
China’s Manufacturing Data
China’s Caixin/S&P Global manufacturing survey showed slower-than-expected growth in December. The PMI index fell to 50.5 from 51.5 in November, missing the forecast of 51.7. The decline in the PMI was primarily attributed to a dip in export orders, amid ongoing concerns over the international trade outlook.
Weather and Production Discipline Support Prices
The energy sector also received a boost as weather forecasts predicted a sharp drop in temperatures for January, which could increase heating demand. Additionally, oil markets found support from expectations that OPEC+ would maintain production discipline, adhering to existing quotas rather than ramping up output in the near future.
OPEC+ production quotas have been a significant factor in maintaining stability in oil prices, as any delay in planned output increases could help balance supply and demand, keeping prices relatively firm.
The market also anticipates that the Trump administration will tighten sanctions on Iran and potentially Venezuela, adding to the ongoing clampdown by the U.S. and Europe on Russia’s shadow shipping fleet.
The US Dollar: A Headwind for Oil Prices
Despite the positive news on the supply and demand side, oil markets are facing headwinds from the rising US dollar. A stronger dollar makes oil imports more expensive for non-dollar economies, potentially dampening demand for crude.
In December, the US Dollar Index gained more than 2.5%, marking its third consecutive month of positive performance. The index ended 2024 slightly below its 26-month high, touching 108.50 on the last day of the year. This uptick in the dollar has created some pressure on oil prices, as the currency’s strength adds to the costs of importing crude.
Key Takeaways
Crude oil futures are slightly higher as 2025 begins, with Brent nearing $75/b and WTI hovering around $72/b.
China’s economy remains a key driver for oil prices, with stimulus measures and optimistic growth forecasts from President Xi Jinping.
Despite positive demand expectations, concerns about China’s manufacturing slowdown and US dollar strength present challenges for the oil market.
Weather forecasts and production discipline from OPEC+ are providing some support to crude prices.
Sanctions against Iran, Venezuela, and Russia are likely to continue influencing global oil supply and market dynamics.
