Oil prices finish higher to kick off 2025, boosted by stronger demand outlook

By Myra P. Saefong and William Watts

Natural Gas Prices Rise as Arctic Blast Forecasts Improve Demand Outlook

Oil futures started 2025 on a positive note on Thursday, boosted by expectations of stronger demand, with hopes that China, the world's largest crude importer, will keep promises to further boost production. growth in the new year.

The U.S. government on Thursday revealed a sixth consecutive weekly decline in crude supplies, contributing to higher oil prices, although the data also showed significant gains in supplies of petroleum products. Meanwhile, forecasts of much colder weather in many parts of the United States have also supported the energy market, including natural gas.

Price movements

– West Texas Intermediate CL00 crude for February delivery CL.1 CLG25 rose $1.41, or 2 percent, to settle at $73.13 a barrel on the New York Mercantile Exchange, the highest monthly reading since October 14, according to the Dow Jones Market. Data.

— March Brent crude BRN00 BRNH25, the global benchmark, gained $1.29, or 1.7%, to $75.93 a barrel on ICE Futures Europe.

— February's RBG25 gasoline added 2.1% to $2.05 a gallon, while February's HOG25 heating oil added 1.6% to $2.35 a gallon.

–Natural gas for February delivery NGG25 settled at $3.66 per million British thermal units, up 0.7%.

Market drivers

Oil prices ended higher on Thursday, supported by “rising demand expectations” after the Energy Information Administration recently raised its oil demand forecast closer to a record for this period of the year. 'year, said Phil Flynn, senior market analyst at Price Futures Group. told MarketWatch.

Total U.S. oil demand increased by about 700,000 barrels per day since September to 21.01 million bpd in October, which was the highest since August 2019 and a record for the month. 'October, Flynn said, citing EIA data.

China's economy, meanwhile, was “generally stable and grew amid stability” during the year, Chinese President Xi Jinping said Tuesday in a speech published by the official Xinhua news agency. . Looking ahead to 2025, Xi said the government would pursue “more proactive macroeconomic policies” and continue to support the economy.

“Statements by President Xi Jinping promising more proactive policies to boost growth have raised expectations of increased demand for energy. While recent data indicates marginal growth in the country's manufacturing activity, sectors such as services and construction have started to show signs of recovery, suggesting a gradual strengthening of growth. the Chinese economy,” Antonio Di Giacomo, senior market analyst at XS.com, said in a note.

In the United States, cold weather is also favorable, with fears that a cold snap across Texas next week could boost energy demand, said Price Futures Group's Flynn. AccuWeather forecasts “significantly” colder conditions, with a winter storm forecast for the Midwest, South and East that could lead to the coldest January in more than a decade.

Crude prices climbed in December, leaving WTI with a mostly flat performance for 2024, while Brent lost 3.1% for its second consecutive losing year. Oil futures were not settled on Wednesday due to the New Year holiday.

Provide data

The EIA released its weekly data on U.S. oil supplies on Thursday, a day later than usual due to the New Year's holiday on Wednesday.

The report revealed a sixth consecutive weekly decline in domestic commercial crude inventories, which fell by 1.2 million barrels for the week ended December 27.

The report is expected to show a decline of 2.4 million barrels on average, according to a Wall Street Journal survey of analysts. As of Tuesday evening, the American Petroleum Institute reported a decline in crude inventories of 1.4 million barrels, according to a source citing the data.

However, the EIA also reported large weekly increases in supply, of 7.7 million barrels for gasoline and 6.4 million barrels for distillates. The Wall Street Journal survey projects a decline in inventories of 300,000 barrels for gasoline and an increase in supply of 100,000 barrels for distillates.

The “staggering rise” in petroleum products caused “some hesitation” in oil's rally Thursday, Flynn said. The stockpiling is more than likely due to year-end fiscal positioning and will likely be corrected next week, he said. U.S. states and counties conduct their tax assessment of stored crude oil supplies at the end of the year.

U.S. oil production ended the year at just under 13.6 million barrels per day, but that was the “calm before the storm as looming frigid temperatures in the United States appear likely to cause issues,” Matt Smith, Kpler’s chief U.S. analyst, said in an email. comments. U.S. commercial crude inventories have fallen by 15.5 million barrels this year, offset by a transfer of 39 million barrels to the U.S. Strategic Petroleum Reserve, he said.

The EIA delayed its weekly data on U.S. natural gas supplies until Friday morning.

-Myra P. Saefong -William Watts

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