Brent gains on demand hopes from Chinese economic stimulus

The front-month ICE Brent contract has gained $0.28/bbl on the day, to trade at $72.50/bbl at 09.00 GMT.

PHOTO: Oil barrels. Getty Images

Upward pressure:

Brent crude’s price gained on optimism over Chinese economic stimulus after Beijing announced a shift from a “prudent” to a “moderately loose” monetary policy for 2025. This could drive oil demand up in the world’s second-largest consumer.

A moderately loose monetary policy could mean interest rate cuts or reserve requirement ratio cuts, among other measures. “Oil prices rose… as expectations that China will stimulate their economy with lower interest rates thereby increasing oil demand,” Price Futures Group’s senior market analyst Phil Flynn said.

According to media reports, the Biden administration is considering fresh and stricter sanctions on Russia’s oil trade. Market analysts say the new sanctions could put some upward pressure on Brent’s price.

The news comes amid the transition in key US leadership roles. “The Democratic economic team at the White House is gearing up to potentially escalate sanctions against Russia's oil trade, aiming further to choke off funds to the Kremlin's military endeavours,” SPI Asset Management’s managing partner Stephen Innes remarked.

Downward pressure:

Brent’s price felt some downward pressure today after the American Petroleum Institute (API) reported a surprise build in US crude stocks.

Crude oil inventories in the US rose by 499,000 bbls in the week that ended 6 December, according to the API. The weekly inventory rise contradicted market expectations of a 1.30 million-bbl draw during the week.

A surge in US crude stocks indicates a slowdown in oil demand growth, which can lower Brent's price. Official US government data on crude oil stockpiles from the US Energy Information Administration (EIA) will come out later today.

The oil market is currently awaiting fresh US inflation data tomorrow, which will determine the Fed’s preferred path for interest rate cuts this year.

Oil investors are “trading cautiously on the eve of a critical consumer inflation report that could dictate the Federal Reserve's next move on interest rates,” Innes said.

By Aparupa Mazumder

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