DTN Oil

WASHINGTON, D.C. (DTN) -- Oil futures nearest delivery on the New York Mercantile Exchange (NYMEX) and Brent crude traded on the Intercontinental Exchange settled Friday's session higher. All petroleum contracts registered hefty weekly gains propelled by stronger-than-expected macroeconomic data in the United States and signs of deeper fiscal stimulus in China that boosted expectations for demand gains in Asia's largest economy, particularly from the aviation and petrochemicals sectors.

The People's Bank of China on Thursday sharply cut its reserves requirements ratio to boost lending for businesses and signaled more supportive measures are likely to follow. The unusual move by China's central bank is seen as steering credit into faster-growing segments of the economy, particularly sectors exposed to domestic consumption. For instance, China's commercial aviation has become one of the most rapidly growing industries following the removal of COVID-19 restrictions in late 2022.

A combination of pent-up demand and government support measures have helped international air traffic to recover 80% of its pre-pandemic levels, according to China's Civil Aviation Administration. Domestic air travel already climbed 1.5% above pre-pandemic levels to become China's fastest-growing type of transportation, the regulator added.

Organization of the Petroleum Exporting Countries (OPEC) estimates China's oil consumption will average 16.13 million barrels per day (bpd) in the first quarter, pushing up the annualized demand rate to 16.78 million bpd from 16.15 million bpd seen over 2023. Major forecasting agencies expect that China will continue to lead global oil demand growth in 2024.

In financial markets, U.S. dollar weakened and stocks on Wall Street powered higher after the latest round of inflation data showed price pressures eased further in December despite a strong trend in personal consumption. The Personal Income and Outlays, a preferred inflation measure by the Federal Reserve, rose 2.6% in the 12 months ending in December, matching the annual increase in November. But the core PCE index dropped by a much steeper margin to 2.9% from November's 3.2% annual gain. This marked the lowest reading since before the pandemic. Interestingly, the retreat in inflation happened even as the personal consumption index surged 0.7% -- a much larger gain than expected by markets. Meanwhile, U.S. gross domestic product increased by a solid 3.3% during the final three months of 2023, well above the average growth rate of 2.3% from 2015-2019.

Stronger-than-expected macroeconomic data again prompted repricing of rate cuts in federal funds this year with investors almost equally split over the odds for the first rate cut in March. The Federal Open Market Committee will hold its first policy meeting of 2024 on Jan. 31.

On the supply side, a suspected Ukrainian drone attack hit another refinery complex in southern Russia on Thursday, knocking offline the 240,000-bpd Tuapse refinery on the coast of the Black Sea. If confirmed, the attack would be the latest in a series of long-range drone strikes against Russia's energy infrastructure.

Earlier this week, the port of Ust-Luga on the Baltic Sea briefly suspended oil and fuel exports after a processing facility adjacent to the export terminal came under attack. This followed reported strikes targeting a fuel depot in Bryansk and an attempted drone attack on the St. Petersburg Oil Terminal. In recent days, markets have grown increasingly concerned that a strike would lead to deeper production and export disruptions in Russia.

Both West Texas Intermediate and Brent futures finished the volatile week at their highest levels since late November with the international benchmark settling above the $81.67 barrel (bbl) 200-day moving average for a second session Friday. Brent March futures on ICE jumped $1.12 to settle at $83.55 bbl and March WTI contract settled a tad above $78 bbl, also ending the session above its 200-day moving average, now at $77.62 bbl.

NYMEX February ULSD futures advanced $0.0480 to $2.8434 gallon, the highest settlement on the spot continuous chart since Nov. 29. February RBOB futures gained $0.0297 to $2.2941 gallon, the highest settlement for a front month gasoline contract since Oct. 23.

Liubov Georges can be reached at liubov.georges@dtn.com