Selangor Journal
The sun sets behind the chimneys of the Total Grandpuits oil refinery, southeast of Paris, France, on March 1, 2021. — Picture by REUTERS

Oil prices post three pct annual decline, slipping for second year in a row

HOUSTON, Jan 1 — Oil prices fell around three per cent in 2024, slipping for a second straight year, as the post-pandemic demand recovery stalled, China’s economy struggled, and the United States (US) and other non-OPEC producers pumped more crude into a well-supplied global market.

Brent crude futures on Tuesday, the last trading day of the year, settled up 65 cents, or 0.88 per cent, to US$74.64 a barrel. US West Texas Intermediate (WTI) crude settled up 73 cents, or 1.03 per cent, to US$71.72 a barrel.

The Brent benchmark settled down around three per cent from its final 2023 closing price of $77.04, while WTI was roughly flat with last year’s final settlement.

In September, Brent futures closed below US$70 a barrel for the first time since December 2021, and this year Brent broadly traded under highs seen in the past few years as the post-pandemic demand rebound and price shocks of Russia’s 2022 invasion of Ukraine began to fade.

Oil will likely trade around US$70 a barrel in 2025 on weak Chinese demand and rising global supplies, offsetting OPEC+-led efforts to shore up the market, a Reuters monthly poll showed on Tuesday.

A weaker demand outlook in China in particular forced both the Organisation of the Petroleum Exporting Countries and the International Energy Agency (IEA) to cut their oil demand growth expectations for 2024 and 2025.

The IEA sees the oil market entering 2025 in surplus, even after OPEC and its allies delayed their plan to start raising output until April 2025 against a backdrop of falling prices.

US oil production rose 259,000 barrels per day to a record high of 13.46 million bpd in October, as demand surged to the strongest levels since the pandemic, data from the US Energy Information Administration (EIA) showed on Tuesday.

Output is set to rise to a new record of 13.52 million bpd next year, the EIA said.

An oil pump jack seen in a field near Calgary, Canada, on July 21, 2014. — Picture by REUTERS

Economic, Regulatory Outlook

Investors will be watching the US Federal Reserve’s interest rate-cut outlook for 2025 after its bank policymakers this month projected a slower path due to stubbornly high inflation.

Lower interest rates generally spur economic growth, which feeds energy demand.

Some analysts still believe supply could tighten next year depending on President-elect Donald Trump’s policies, including those on sanctions. He has called for an immediate ceasefire in the Russia-Ukraine war, and he could re-impose a so-called maximum pressure policy toward Iran, which could have major implications for oil markets.

“With the possibility of tighter sanctions on Iranian oil with Trump coming in next month, we are looking at a much tighter oil market going into the new year,” said Price Futures Group senior analyst Phil Flynn, also citing firming Indian demand and recent stronger Chinese manufacturing data.

China’s manufacturing activity expanded for a third-straight month in December, though at a slower pace, suggesting a blitz of fresh stimulus is helping to support the world’s second-largest economy.

Buoying prices on Tuesday, the US military said it carried out strikes against Houthi targets in Sana’a and coastal locations in Yemen on Monday and Tuesday.

The Iran-backed militant group has been attacking commercial shipping in the Red Sea for more than a year in solidarity with Palestinians amid Israel’s year-long war in Gaza, threatening global oil flows.

Meanwhile, US crude oil stocks fell last week while fuel inventories rose, market sources said, citing American Petroleum Institute figures on Tuesday.

Crude stocks fell by 1.4 million barrels in the week ended December 27, the sources said on condition of anonymity. Gasoline inventories rose by 2.2 million barrels, and distillate stocks climbed by 5.7 million barrels.

— Reuters

A view of the Phillips 66 Company’s Los Angeles Refinery (foreground), which processes domestic and imported crude oil into gasoline, aviation, and diesel fuels, as well as storage tanks for refined petroleum products at the Kinder Morgan Carson Terminal (background), at sunset in Carson, California, the United States, on March 11, 2022. — Picture by REUTERS

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