Oil Prices Rise on Positive Data from China; Easing Middle East Tensions Limit Gains From Investing.com

Investing.com – Oil prices rose in Asian trading on Friday, boosted by positive economic data from China that beat expectations and boosted market sentiment. However, gains were limited by easing geopolitical tensions in the Middle East.

At 9:35 p.m. ET (02:35 GMT), they were up 0.4% at $81.63 a barrel and up 0.5% at $78.24 a barrel for March expiry.

Oil prices trended lower in the previous session as market participants booked profits after prices hit a four-month high earlier this week.

Expectations that Yemen’s Houthi militia would announce a halt to their attacks on ships in the Red Sea following a ceasefire agreement between Israel and the Palestinian militant group Hamas also put downward pressure on oil prices.

Strong Chinese data sparks optimism about rising demand

Data on Friday showed Chinese growth rose more than expected to 5% in the fourth quarter of 2024, in line with Beijing’s 5% growth target.

Other data showed growth grew more than expected in December as Beijing’s latest stimulus measures continued to support business activity.

December was also stronger than expected and accelerated significantly compared to the previous month’s increase.

The outlook for oil demand hinges on hopes that China, the world’s largest oil importer, can revive its economy, especially as there are concerns about possible oversupply due to expected production increases from non-OPEC countries.

Expectations of a halt to Houthi attacks in the Red Sea limit gains

At the geopolitical level, maritime security officials expect Yemen’s Houthi militia to stop attacks on ships in the Red Sea following a ceasefire agreement between Israel and Hamas.

Since November 2023, the Houthis have carried out over 100 attacks on ships, causing significant disruption to global shipping and increased insurance costs.

The expected cessation of hostilities could restore confidence in these key sea routes, potentially leading to stabilization of shipping operations and impact on supply chains.

The US sanctions against Russian oil provide support

In a strategic move, the US has imposed new sanctions on Russian oil exports. The International Energy Agency (IEA) noted that these sanctions could disrupt Russia’s oil supply chains and potentially lead to a tightening of the global oil market.

The sanctions focus on companies responsible for more than a third of Russian and Iranian crude oil exports in 2024, with the aim of restricting their ability to transport and sell oil. This development has raised concerns about possible supply shortages and contributed to upward pressure on oil prices.

Oil prices hit multi-month highs earlier this week following the announcement in anticipation of a supply tightening.

The latest US Energy Information Administration (EIA) showed a significant decline in crude oil inventories last week. This decline further indicates a shortage of supply.