Oil spikes 1% in holiday-thinned session over China stimulus outlook; Brent hits $74 in rangebound trade | Stock Market News

International crude oil prices rose almost one per cent on Thursday, December 26, in a holiday-thinned trading session driven by hopes for additional fiscal policy stimulus in China, the world’s biggest oil importer, and supported by an industry report showing a decline in US crude inventories.

Brent crude futures last rose 48 cents, or 0.7 per cent, to $74.06 per barrel. From Tuesday’s pre-Christmas settlement, US West Texas Intermediate crude was at $70.72, up 0.9 per cent, or 62 cents. Back home, crude oil futures last traded 0.1 per cent higher at ₹5,986 per barrel on the multi-commodity exchange (MCX).

Also Read: India’s oil demand growth to top China’s in 2024, trend to continue next year: S&P

Crude oil trades higher in holiday-thinned session

-According to news agency Reuters, Chinese authorities have agreed to issue three trillion yuan ($411 billion) worth of special treasury bonds next year. Beijing ramps up fiscal stimulus to revive a faltering economy.

-Analysts say two factors support oil prices. On the one hand, support should come from a still undersupplied market, citing the prospect of a drop in US crude inventories in Friday’s official supply report. Additional support comes from the expectation of further fiscal and monetary stimulus in China.

-The World Bank (WB) raised its forecast for China’s economic growth in 2024 and 2025 on Thursday, December 26, but warned that subdued household and business confidence, along with headwinds in the property sector, would continue to weigh on the economic outlook next year.

Also Read: Singapore fuel oil stocks rise to more than 8-year high

-Satoru Yoshida, a commodity analyst at Rakuten Securities, said expectations of increasing fossil fuel production and demand after US President-elect Donald Trump takes office next month are also bolstering crude oil prices.

-According to Reuters, in other developments, shipping agent Tribeca said southbound traffic in Turkey’s Bosphorus strait was set to resume on Thursday, having been halted earlier in the day after a tanker suffered an engine failure.

-The latest weekly report on US inventories from the American Petroleum Institute industry group showed that crude stocks fell by 3.2 million barrels last week. Analysts in a Reuters poll expect crude inventories to fall by 1.9 million barrels in the week to December 20, while gasoline and distillate inventories may fall by 1.1 million barrels and 0.3 million barrels, respectively.

Also Read: Morgan Stanley, HSBC slash crude oil supply forecast; Brent average pegged near $70 for 2025 after OPEC+ verdict

Where are prices headed?

According to Kaynat Chainwala, AVP-Commodity Research, Kotak Securities, oil prices held steady above $70 per barrel on Wednesday, driven by China’s fiscal stimulus and expectations of a drop in US crude inventories after the API reported a draw of 3.2 million barrels. 

According to commodity analysts, a sharp decline in US consumer confidence during the holiday season increased demand worries and pushed oil prices lower. However, Russia-Ukraine tensions are supporting oil prices at lower levels. 

“We expect crude oil prices to remain volatile. Crude oil has support at $68.60-68.00 and resistance at $69.70-70.40 today. In INR, crude oil has support at ₹5,840-5,780 while resistance is at ₹5,970-6,050,” said Rahul Kalantri, VP of Commodities, Mehta Equities Ltd.

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