OIL prices fell around 3 per cent in 2024, slipping for a second straight year, as the post-pandemic demand recovery stalled, China’s economy struggled, and the US and other non-Opec (Organisation of the Petroleum Exporting Countries) producers pumped more crude into a well-supplied global market.
Brent crude futures on Tuesday (Dec 31), the last trading day of the year, settled up US$0.65, or 0.9 per cent, to US$74.64 a barrel. US West Texas Intermediate (WTI) crude settled up US$0.73, or 1 per cent, to US$71.72 a barrel.
The Brent benchmark settled down around 3 per cent from its final 2023 closing price of US$77.04, while WTI was roughly flat with last year’s final settlement.
In September, Brent futures closed below US$70 a barrel for the first time since December 2021, and in 2024 Brent broadly traded under highs seen in the past few years as the post-pandemic demand rebound and price shocks of Russia’s 2022 invasion of Ukraine began to fade.
Oil will likely trade around US$70 a barrel in 2025 on weak Chinese demand and rising global supplies, offsetting Opec+-led efforts to shore up the market, a Reuters monthly poll showed on Tuesday.
A weaker demand outlook in China in particular forced both Opec and the International Energy Agency (IEA) to cut their oil demand growth expectations for 2024 and 2025.
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The IEA sees the oil market entering 2025 in surplus, even after Opec and its allies delayed their plan to start raising output until April 2025 against a backdrop of falling prices.
US oil production rose 259,000 barrels per day to a record high of 13.5 million barrels per day (bpd) in October, as demand surged to the strongest levels since the pandemic, data from the US Energy Information Administration (EIA) showed on Tuesday.
Output is set to rise to a new record of 13.5 million bpd in 2025, the EIA said.
Economic, regulatory outlook
Investors will be watching the Federal Reserve’s interest rate cut outlook for 2025 after Fed bank policymakers this month projected a slower path due to stubbornly high inflation.
Lower interest rates generally spur economic growth, which feeds energy demand.
Some analysts still believe supply could tighten in 2025 depending on President-elect Donald Trump’s policies, including those on sanctions. He has called for an immediate ceasefire in the Russia-Ukraine war, and he could re-impose a so-called maximum pressure policy toward Iran, which could have major implications for oil markets.
“With the possibility of tighter sanctions on Iranian oil with Trump coming in January, we are looking at a much tighter oil market going into the new year,” said Phil Flynn, a senior analyst for Price Futures Group, also citing firming Indian demand and recent stronger Chinese manufacturing data.
China’s manufacturing activity expanded for a third-straight month in December, though at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world’s second-largest economy.
Buoying prices on Tuesday, the US military said it carried out strikes against Houthi targets in Sanaa and coastal locations in Yemen on Monday and Tuesday.
The Iran-backed militant group has been attacking commercial shipping in the Red Sea for more than a year in solidarity with Palestinians amid Israel’s year-long war in Gaza, threatening global oil flows. REUTERS
