Oil Prices Retreat as Market Reassesses Chinese Stimulus Measures
Oil prices fell on Thursday as traders reassessed the effects of China's economic stimulus announcements. Brent crude dropped to $73.26 per barrel, while WTI decreased to $69.62. Skepticism around China's growth persists, despite expected demand increases in 2024, influenced by new energy vehicle sales and rail network expansions.
HASSAN BENYOUB 
Oil prices declined on Thursday in a thinly traded post-Christmas market as traders reevaluated the impact of recent announcements from Beijing on stimulating the Chinese economy.
Price Movements
- Brent crude for February delivery dropped 0.43% to $73.26 per barrel.
- West Texas Intermediate (WTI) for the same month delivery fell 0.68% to $69.62 per barrel.
Market Reaction to Chinese Stimulus
On Tuesday, oil prices were "stimulated by discussions on massive economic stimulus measures" taken by Beijing, as noted by Phil Flynn of Price Futures Group. China, the world's largest oil importer, announced the implementation of an "even more active" fiscal policy for 2025, particularly to support still-fragile consumption, paving the way for an "increase" in its deficit.
However, the market now wants China to "stop talking about stimulus efforts that will boost the economy, and prove concretely that the economy is developing," according to Stewart Glickman of CFRA. Andy Lipow of Lipow Oil Associates added that "at this stage, the market is really skeptical about the possibility of a positive evolution for China in this matter".
Geopolitical Factors
The situation in the Middle East remains "on hold," particularly regarding "next steps in Iran or Syria," according to Lipow. This uncertainty continues to influence oil market sentiment.
Bullish Factors
The first weekly oil stock data from the API, the American federation of industry professionals, published on Tuesday, showed that commercial crude reserves fell by about 3.2 million barrels. The contraction of stocks tends to drive prices up.
Long-term Outlook
Looking ahead, "2025 does not look like a particularly favorable year" for oil, according to Glickman, as fears of oversupply continue to weigh on prices.
China's Oil Demand Outlook
Despite recent stimulus measures, China's oil demand growth is expected to slow. The International Energy Agency (IEA) now projects that the country's oil demand will grow by 180,000 barrels per day (bpd) in 2024, down from the 410,000 bpd it projected in July. This slowdown is attributed to factors such as rising sales of new energy vehicles (NEVs) and China's high-speed rail network.
