Oil Prices Rise in Asian Trade

Oil prices rose in Asian trade on Tuesday but remained within a tight trading range as traders expressed uncertainty over a potential supply glut and softening demand in the coming year.

Trading volumes were thin ahead of the Christmas holiday. Additionally, the strength of the dollar weighed on oil prices after the Federal Reserve indicated a slower pace of rate cuts in 2025.

Brent oil futures expiring in February increased by 0.4% to $72.91 a barrel, while West Texas Intermediate (WTI) crude futures also rose by 0.4% to $69.51 a barrel by 20:22 ET (01:22 GMT).

Oil Nurses Losses in 2024 as Demand Jitters Weigh

Brent and WTI prices have fallen about 5% thus far in 2024, largely due to persistent concerns over slowing demand in China.

Chinese oil imports have steadily decreased this year, reflecting challenges faced by the world's largest oil importer amid slowing economic growth. Although China has outlined plans to boost fiscal spending and stimulus measures for the upcoming year, markets remain cautious and seek more clarity on those measures.

Moreover, the rise in electric vehicle adoption in China has further undermined fuel demand in the country.

Both OPEC and the IEA predict slower demand growth in 2025, with slowing demand from China as a central concern. Additionally, the country may encounter further economic challenges arising from a potential renewed trade war with the U.S. under Donald Trump.

Supply Uncertainty Spurs Caution; US Inventory Data Awaited

Oil markets are wary of a potential supply glut in 2025. The OPEC has recently agreed to extend ongoing supply cuts until at least mid-2025, but production outside of OPEC could increase.

U.S. oil production remains near record highs and could rise in the coming year, especially as Trump has pledged to enhance domestic energy production.

U.S. inventory data from the American Petroleum Institute is expected later on Tuesday and may provide further insights into oil production and supply.