Oil Prices Rise Slightly in Asian Trade

Oil prices rose slightly in Asian trade on Monday as traders took positive cues from the U.S. government avoiding a shutdown over the weekend. Softer inflation data from the U.S. also contributed to this rise.

Demand Focus into 2025

Attention remains on demand prospects heading into 2025, particularly as top oil importer China signals plans for more stimulus measures in the coming year. On the supply side, potential U.S. sanctions against Iran and Russia could tighten supply further.

Current Prices

Brent oil futures expiring in February rose 0.4% to $73.20 a barrel, while West Texas Intermediate crude futures also rose 0.4% to $69.75 a barrel by 20:19 ET (01:19 GMT).

Positive U.S. Cues Supporting Oil Prices

Oil traders expressed relief as the U.S. government avoided a potential shutdown this past weekend, with President Joe Biden approving a stop-gap spending bill that funds the government until March.

Fears of a shutdown had grown after President-elect Donald Trump criticized a bipartisan funding bill and proposed a revised version that was ultimately rejected. Markets worried that a government shutdown during the holiday season would disrupt travel and harm fuel demand.

Support for oil markets also came from a softer dollar, retreating from over one-year highs after the PCE price index, the Federal Reserve’s preferred inflation gauge, showed lower-than-expected readings for November, indicating some cooling in price pressures.

However, this report follows indications from the Fed of a slower pace of rate cuts in 2025, which could negatively impact economic growth and oil demand.

China's Demand and Tight Supplies in 2025

Concerns over slowing demand and potential supply increases saw oil prices trading down more than 5% so far in 2024. Looking ahead to 2025, all eyes will be on the effectiveness of China’s stimulus measures in boosting economic growth.

Additionally, U.S. policies under President-elect Donald Trump may adopt a more protectionist stance towards both China and Iran. Increased sanctions on Iran's oil sector could further limit global supplies, while the U.S. is reportedly considering more sanctions on Russian oil exports.