Oil prices rose about 0.7% on Friday, driven by expectations of economic recovery in China and declining U.S. inventories. Brent is up 0.4% for the week, and WTI has climbed 0.7%.
Analysts point to a potential U.S. crude draw, with the American Petroleum Institute reporting a 3.2 million barrel decline, exceeding earlier forecasts of a 1.9 million barrel drop. The official U.S. Energy Information Administration (EIA) report is awaited for confirmation.
Support for oil prices may also stem from colder weather, boosting seasonal demand. Additionally, the World Bank's revised outlook for stronger Chinese growth in 2024-2025 has fueled optimism, though sluggish business and consumer confidence remain headwinds. China's plans to issue 3 trillion yuan ($411 billion) in special treasury bonds next year to stimulate its economy further support the positive outlook for oil.
However, a stronger U.S. dollar, bolstered by expectations of growth-oriented policies under Donald Trump’s presidency, is limiting gains. A strong dollar typically makes oil more expensive for non-dollar holders, applying downward pressure on prices.
Meanwhile, oil markets remain stable in thin holiday trading. Volatility has declined, reflecting a narrow trading range since mid-October.
Geopolitical tensions persist, with Israel striking Houthi targets in Yemen, heightening risks to Red Sea shipping. While oil has dipped slightly for the year, concerns linger over potential oversupply in 2025 due to slowing Chinese demand and expanding global production.