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Oil Prices Edge Higher Driven by China’s Fiscal Stimulus and U.S. Inventory Decline
Oil prices saw an increase of almost 1% on Thursday, driven by two main factors: expectations of additional fiscal stimulus in China and a report showing a decline in U.S. crude inventories. This uptick occurred during thin holiday trading.
China’s Fiscal Stimulus Boosts Oil Market
Chinese authorities announced plans to issue 3 trillion yuan ($411 billion) worth of special treasury bonds in 2024 to stimulate the country’s faltering economy. This move is expected to boost energy demand, including oil, helping to support global prices.
Declining U.S. Crude Inventories Provide Further Support
An industry report from the American Petroleum Institute (API) showed a reduction of 3.2 million barrels in U.S. crude inventories, signaling tighter supply in the market. Traders are awaiting confirmation from the official U.S. Energy Information Administration (EIA) report, expected on Friday, which is anticipated to show a smaller inventory decline of around 1.9 million barrels.
Market Sentiment and Expectations for Future Growth
Despite global economic challenges, including subdued household and business confidence in China, expectations remain positive for oil prices. The World Bank raised its forecast for China’s economic growth in 2024 and 2025, though concerns over the property sector persist.
Additional Drivers for Oil Prices
Market analysts suggest that further fiscal and monetary stimulus in China will provide additional support to oil prices. Furthermore, expectations of increased U.S. fossil fuel production and demand under the incoming U.S. president also play a role in boosting market sentiment.
Bosphorus Strait Incident and Shipping Traffic
In shipping news, southbound traffic through Turkey’s Bosphorus Strait resumed on Thursday after a temporary halt caused by a tanker engine failure. This event, however, did not significantly affect global oil prices.
Conclusion
Overall, the combination of fiscal stimulus in China and reduced U.S. crude inventories has fueled a modest rise in oil prices, with market participants looking ahead to further developments in both the global economy and energy markets.