Brent edges down on stronger US dollar

The front-month ICE Brent contract has inched $0.47/bbl lower on the day, to trade at $73.41/bbl at 09.00 GMT.

PHOTO: Crude oil pump jacks in colour. Getty Images

Upward pressure:

Market optimism over economic stimulus efforts to drive China’s recovery has lent support to the price of Brent crude. Chinese authorities plan to issue 3 trillion yuan ($411 billion) in special treasury bonds next year to revive the economy, Reuters reported, citing sources.

“Oil is getting a boost from talk of a massive amount of economic stimulus from China,” noted Phil Flynn, senior market analyst at Price Futures Group.

The World Bank has revised its forecasts for China's economic growth in 2024 and 2025, Reuters reported. This economic growth could increase demand for oil and drive up Brent prices.

In the US, crude oil inventories dropped by 3.20 million bbls in the week ending December 27, following a larger decrease of 4.70 million bbls the previous week, according to American Petroleum Institute (API) estimates. A decline in US crude oil inventories indicates rising oil demand, which could support Brent prices.

“The American Petroleum Institute’s slightly bullish US oil stocks data may have spurred the buying interest through Thursday,” said Vandana Hari, founder and analyst at VANDA Insights.

The US Energy Information Administration (EIA) is expected to release its closely watched crude oil stockpile report later today.

Downward pressure:

A stronger US dollar pressured oil prices, limiting some of its gains.

The dollar has climbed approximately 7% this quarter and remains near a two-year high against major currencies after the Federal Reserve indicated slower rate cuts in 2025, according to Reuters.

A stronger dollar increases the cost of oil for buyers using other currencies. This can reduce oil demand and put downward pressure on prices.

By Tuhin Roy

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