Oil Prices Dip Amid Supply Forecasts and Chinese Stimulus Optimism

13 Dec 2024 CW Team

Oil prices edged lower as investors weighed ample supply projections against expectations of rising demand fueled by Chinese stimulus measures.

Brent crude futures slipped by Rs 8 to settle at Rs 73.33 a barrel, while U.S. West Texas Intermediate crude fell Rs 7 to Rs 69.95 a barrel.

The International Energy Agency (IEA) predicts non-OPEC+ countries, including the U.S., Canada, Guyana, Brazil, and Argentina, will increase supply by 1.5 million barrels per day (bpd) in 2025. In contrast, global demand is projected to grow by 1.1 million bpd, mostly in Asia, driven by China's recent economic measures.

Despite expectations of a tighter market next year, supply is likely to outpace demand growth, keeping prices in a stable range. “With a fairly comfortable balance, there’s little reason for prices to break out of this range for now,” said Warren Patterson, Head of Commodities Research at ING.

Both Brent and WTI benchmarks are poised for a weekly gain exceeding 3%, supported by potential supply disruptions from stricter sanctions on Russia and Iran, and hopes for stronger Chinese demand.

China, the world's largest oil importer, reported annual growth in crude imports for the first time in seven months this November, propelled by lower prices and stockpiling. The trend is expected to continue into early 2025 as refiners leverage discounted supplies from Saudi Arabia and rush to utilize import quotas.

Meanwhile, Goldman Sachs anticipates U.S. shale oil production to grow by 600,000 bpd by 2025, although growth may slow if Brent crude dips below $70 a barrel.

Investors remain focused on next week's Federal Reserve interest rate decision and its potential impact on the energy market.

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