DTN Oil Update
Oil Futures Hit Multi-Week Highs Ahead of 2025
HOUSTON (DTN) --â?¯Oil futures settled higher to close the year on Tuesday, recording multi-week increases driven in part by expectations of tight supplies and a recovery of global oil demand in 2025.
The February NYMEX WTI futures contract rose $0.88 to $71.87 barrle (bbl) hitting a five-week hike. In 2024, the average price of the front-month NYMEX WTI was $72.5 bbl but it was below the estimated average price of $76.96 bbl recently forecasted by the Energy Information Administration's Short-Term Energy Outlook STEO report.
The ICE Brent futures contract for February delivery climbed by $0.84 to $74.83 bbl, the highest level reported in the last three weeks.
Downstream, the January ULSD futures contract closed the year up by $0.0211 to $2.3206 gallon, while the January RBOB futures contract rose by $0.0252 to $2.0015 gallon. In 2024, the average price for front-month ULSD and RBOB future contracts was 2.4084 gallon and 2.0530 gallon, respectively.
Abundant crude supplies and poor buying interest from China as its government struggled to lift domestic consumption throughout 2024 put downward pressure on oil futures prices this year.
Looking ahead, there are mixed feelings about what to expect from China's demand for crude and fuels and its impact on oil futures in 2025.
Some market participants anticipate an increasing demand and higher oil prices in 2025, compared to this year, driven by stricter sanctions on Russian and Iranian crude, and the economic recovery of China based on an ambitious stimulus plan, which includes a flexible fiscal policy and more government spending.
But others still believe global oil demand will continue sluggish next year as they remain skeptical about a potential reactivation of China's domestic consumption, coupled with increasing concerns about persistent inflationary pressures on the U.S. economy.
On Jan. 20, President-elect Donald Trump will be sworn for a second term in which the energy sector is expected to play an important role. Trump aims to increase oil and gas production to help reducing fuel prices and diminish high inflation levels anticipated by the Federal Reserve due to less interest rates cuts next year.
But it will be difficult to convince U.S. oil producers and refiners to increase output when they reported slim margins this year because of low crude prices and sluggish global demand, mainly from China.
Additionally, the upcoming Trump administration has threatened to impose a 60% trade tariff on products manufactured in China, 25% against Mexico and Canada, its main commercial partners, and to the European Union, which is expected to have a negative impact on the U.S. inflation and could strength even more the U.S. dollar against other foreign currencies.
The approach that the Trump administration will have toward the Russia-Ukraine war will be crucial to see if the U.S. imposes additional sanctions on Russian and Iranian crude next year, which could contribute to increased oil prices.
The EIA-STEO report anticipates in 2025 the WTI spot price will average $71.63 bbl, while Brent could reach an average price of $76.08 bbl.
Maria Eugenia Garcia can be reached at Maria.Garcia@dtn.com
