NEW YORK (Reuters) – By Scott DiSavino
Monday’s oil prices exhibited a degree of volatility as economic indicators from the United States and Germany pointed toward a mixed outlook, balancing factors such as a weaker U.S. dollar and forecasts for increased heating demand during an upcoming winter storm.
Price Fluctuations
For five consecutive trading days, Brent futures exhibited steady growth, but the momentum gave way to a decline of 21 cents, or 0.3%, closing at $76.30 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude fell by 40 cents, or 0.5%, to settle at $73.56. Despite these decreases, both benchmarks continued to operate within technically overbought territory for a third successive day.
Key Factors Influencing Prices
The fluctuation in crude prices was influenced by several factors:
- Geopolitical Tensions: Expectations of additional fiscal stimulus to bolster China’s faltering economy played a role in keeping Brent and WTI futures elevated, with Brent reaching its highest level since October 14 last year.
- Energy Demand and Supply: The rising demand for natural gas as heating fuel across the U.S., driven by an impending winter storm, contributed to price increases earlier in the day.
Market Fundamentals
Analysts at Eurasia Group posited that oil markets in 2025 would feature balanced supply-and-demand dynamics, though prices would be sustained by enduring geopolitical tensions. They forecasted that ongoing low demand growth might be outpaced by increased supply, particularly from the U.S., with potential impacts from OPEC as well.
U.S. Economic Indicators
Data from the U.S. Department of Commerce revealed:
- New Orders for Manufactured Goods: A decline in November signaling weak demand for commercial aircraft amid economicslack.
- Business Spending on Equipment: A slowdown in the fourth quarter, indicating reduced capital investment.
German Economic Data
Germany’s annual inflation rate exhibited an unexpected increase in December, attributed to elevated food prices and a smaller-than-expected drop in energy prices compared to prior months. This context underscores the pressures faced by Eurozone central banks, which often resort to interest rate hikes to combat inflationary pressures.
Central Bank Strategies
In light of higher inflation, central banks typically raise interest rates, potentially stifling economic growth and curbing energy demand. CRUDE PRICES WERE UPEarlier in the day, crude prices benefited from a winter storm across the United States, leading to a spike in natural gas prices by 10%. Diesel futures closed at their highest level since October 7.
Additional Factors
Crude prices also saw upward movement earlier in the session due to a 1.1% depreciation of the U.S. dollar against a basket of currencies following a report suggesting President-elect Donald Trump considered imposing tariffs, targeting only critical imports. This development provided relief for economies anticipating broader tariffs but subsequently, the dollar largely mitigated these gains.
China’s Economic Outlook
The Chinese yuan depreciated to its weakest level in 16 months against the U.S. dollar, driven by growing trade concerns. Enhanced demand expectations evidenced through Saudi Aramco raising crude prices for Asian buyers in February for the first time in three months.
Security Improvements
Sudan lifted a force majeure declaration for the transport of crude oil from KhARTOUM to JUBA following significant security enhancements, ensuring smoother logistics amid heightened tensions.
