Oil is rising from a two-month high on optimism over growth policy support from Reuters
Written by Florence Tan
SINGAPORE (Reuters) – Oil prices extended their gains on Friday after closing at their highest in more than two months in the previous session on hopes that governments around the world may increase policy support to revive economic growth that will boost fuel demand.
futures rose 16 cents, or 0.2%, to $76.09 a barrel at 0132 GMT after settling at their highest since Oct. 25 on Thursday. US West Texas Intermediate crude was at $73.32 a barrel, up 19 cents, or 0.3%, and Thursday’s close was the highest since Oct. 14.
Both contracts are on track for their second weekly increase as investors return from vacation, improving the exchange rate.
Factory activity in Asia, Europe and the US ended 2024 on a soft note as expectations for the new year soured amid growing trade risks from Donald Trump’s second term in office and China’s weak economic recovery.
“December PMIs in Asia were a mixed bag, but we continue to expect manufacturing activity and GDP growth in the region to remain low in the near term,” Capital Economics analysts said in a paper, referring to purchasing managers’ index data published in. Thursday.
“With growth set to struggle and inflation below target in many countries, we think central banks in Asia will continue to ease policy.”
Low interest rates should encourage economic growth which would lead to higher fuel consumption.
Investors are eyeing another interest rate cut by the US Federal Reserve this year to support its economy, while Chinese President Xi Jinping has promised more proactive policies to spur growth.
“With China’s economy poised to play a key role in 2025, hopes are pinned on government measures to encourage more consumption and bolster oil demand growth in the coming months,” said StoneX analyst Alex Hodes.
In the US, the world’s biggest oil, gasoline and distillate purchases jumped last week as refineries increased production but gasoline demand fell in two years. [EIA/S]
Crude inventories fell slightly more than expected, down 1.2 million barrels to 415.6 million barrels last week compared to analysts’ expectations for a 2.8-million barrel draw.
Traders are also keeping a close eye on the latest weather forecasts as expected cold weather in the US and Europe in the coming weeks could increase demand for diesel instead of heating.
