(Bloomberg) — Oil continued its year-end advance, with a third day of gains after factory activity expanded for a third month in China, the world’s top crude importer.
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Brent futures rose above $74 a barrel in London, paring their decline for the year to 3.4%. China’s economy has been showing tentative signs of recovery following a raft of stimulus measures, though the nation faces the threat of a new trade war from the incoming Trump administration.
Crude has been stuck in a narrow trading range since mid-October, putting Brent on track for a second straight annual decline — albeit much smaller than last year’s — and leaving US benchmark West Texas Intermediate little changed.
Bullish bets on WTI reached a four-month high in the penultimate week of 2024 as investors positioned for a possible turbulent year ahead.
Chinese President Xi Jinping said the country’s gross domestic product is expected to expand around 5% for the full year of 2024, meeting official targets. Still, President-elect Donald Trump has threatened tariffs on China, Canada and Mexico.
The oil market is also facing a global oversupply in 2025, making it harder for the OPEC+ alliance led by Saudi Arabia to revive idled production. Some banks have forecast crude prices will continue to weaken over the next two years.
On the other hand, a potential flare-up in hostilities in the Middle East or Ukraine could provide short-term support for oil. Trump’s pick for national security adviser has vowed to restore the “maximum pressure” campaign on Iran that squeezed the nation’s crude exports during Trump’s first term.
“I’m not fully buying into this overwhelming bearishness,” said John Driscoll, director and founder of Singapore-based consultant JTD Energy Services Pte. “We may yet see some discipline on the upstream side from the oil producers, and I would not rule out the possibilities of black swans like geopolitical events or extreme weather.”
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