By Laila Kearney
NEW YORK (Reuters) -Oil prices stabilized above $1 a barrel on Thursday as investors returned for the first trading day of 2025 with an optimistic outlook on China’s economy and fuel demand following a pledge by President Xi Jinping to boost growth.
Rising gasoline and distillate inventories in the US put pressure on prices and limited profits.
futures settled at $75.93 a barrel, up $1.29, or 1.7%. U.S. West Texas Intermediate crude settled at $73.13 per barrel, up $1.41, or 2%.
Xi said in his New Year’s speech on Tuesday that China would adopt a more proactive policy to promote growth in 2025.
Factory activity in China grew slower than expected in December, a Caixin/S&P Global survey showed on Thursday, amid concerns about tariffs proposed by newly elected US President Donald Trump. Some analysts see weaker Chinese data as positive for oil prices, as Beijing could be encouraged to accelerate stimulus measures.
An official survey published on Tuesday showed that Chinese manufacturing activity barely grew in December. The services and construction sectors fared better, with data suggesting policy incentives are trickling down to some sectors.
U.S. oil stocks data from the Energy Information Administration released Thursday, a day later than usual because of the New Year’s holiday, showed gasoline and distillate stocks rose last week.
US gasoline inventories rose by 7.7 million barrels in the week to 231.4 million barrels. Distillate inventories, including diesel and oil, increased by 6.4 million barrels this week to 122.9 million barrels.
“The negative part of the release was the large product inventory buildup,” said Jim Ritterbusch of Ritterbusch and Associates in Florida, which he said was due to an unexpected drop in demand.
Crude inventories fell less than expected, falling 1.2 million barrels last week to 415.6 million barrels, compared with analysts’ expectations in a Reuters poll for a decline of 2.8 million barrels. [EIA/S]
Traders starting the new year are also likely to be weighing higher geopolitical risks and Trump’s efforts to revive the U.S. economy against the expected negative impact of the proposed tariffs, according to IG market analyst Tony Sycamore.
“Tomorrow’s US ISM production release will be key to the next step,” Sycamore said.
Sycamore said WTI’s weekly chart is moving itself into a tighter range, indicating a big move is coming.
“Rather than trying to predict how the break will happen, we tend to wait for the break and then go ahead with it,” he added.
Oil prices are likely to remain limited to near $70 a barrel in 2025, down for a third year after a 3% decline in 2024, with weak Chinese demand and rising global supply offsetting OPEC+ efforts to support the market , according to a Reuters poll.
In Europe, Russia halted exports of gas pipelines through Ukraine on New Year’s Day after the transit deal expired on December 31. The European Union has arranged an alternative supply ahead of the widely expected shutdown, while Hungary will continue to receive Russian gas through the TurkStream pipeline under the Black Sea.
