Oil Prices Edge Lower Amid Supply Surplus Expectations

Oil prices edged lower on Friday amid expectations of a supply surplus in 2025, although losses were tempered by optimism over China’s new stimulus measures to revitalize its economy.

At 08:30 ET (01:31 GMT), Brent Oil Futures fell 0.1% to $73.34 a barrel, while Crude Oil WTI Futures slightly decreased to $69.59 a barrel.

Both contracts, set to expire in February, are poised for significant weekly gains following a key policy meeting in China that brightened market sentiment with hopes for more stimulus. Additionally, expectations of a Federal Reserve interest rate cut next week could bolster economic activity in the U.S. and increase demand.

IEA Oversupply Outlook Drags Oil Prices

Oil prices remained largely stable on Thursday after the International Energy Agency (IEA) slightly raised its demand forecast for the coming year but maintained its outlook of a well-supplied oil market.

Market sentiment has also been impacted by broader economic concerns, such as weaker-than-expected demand growth in China, traditionally a major driver for global oil consumption. The IEA reported a contraction in China's oil demand, reaffirming the anticipated oversupply scenario.

OPEC has revised its forecasts for oil demand growth downward for 2024 and 2025 for the fifth consecutive time, while continuing its supply cuts. Despite this bearish outlook, refinery operations are increasing in December, with seasonal factors potentially providing temporary price support. However, traders remain cautious due to rising supply and slow demand recovery.

China Stimulus Cheer Keeps Oil Prices Supported

China has announced plans to boost its budget deficit, increase debt issuance, and ease monetary policy to promote economic growth amid expected trade tensions with the U.S., as detailed by the Central Economic Work Conference (CEWC) held on December 11-12.

Analysts view this change in strategy as a signal that China is willing to take on more debt to support economic growth over short-term financial risks. These measures aim to stimulate industrial activity, infrastructure projects, and consumer spending, which are likely to increase energy consumption, particularly for oil.

U.S. Treasury Secretary Janet Yellen noted that a weaker global oil market could provide opportunities for additional actions against Russia's energy sector as the U.S. continues efforts to limit Moscow's ability to wage war against Ukraine. Potential supply cuts from Russia further support oil prices.