Oil prices reacted to industrial growth in China.

Against the backdrop of data on the growth of manufacturing activity in Chinese factories in December, oil prices have risen.

According to Reuters, the price of Brent oil increased by 0.8% to $74.59 per barrel, while American West Texas Intermediate oil rose by 0.9% to $71.61 per barrel. Over the year, the price of Brent oil decreased by 3.2%, and West Texas Intermediate fell by 0.1%.

Although China's manufacturing activity has increased for the third consecutive month in December, it has done so at a slower pace. There is an active revival of the second largest economy in the world.

The Chinese authorities have also decided to issue special treasury bonds worth 3 trillion yuan in 2025 to begin restoring economic growth.

The weak oil demand forecast in China has led to a decrease in oil demand expectations from the Organization of the Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) for 2025.

OPEC and its allies have postponed their plan to increase production until April 2025 due to falling prices. The IEA projects a surplus of global oil supply over demand in 2025, even with OPEC+ restrictions, due to rising production in the U.S. and other producing countries.

Despite the long-term demand forecast, oil prices have short-term support due to a decline in crude oil inventories in the U.S. It is expected that these inventories will decrease by 3 million barrels over the past week.

Prices were also influenced by a larger-than-expected reduction in crude oil inventories in the U.S. for the week ending December 20, due to increased demand during the holiday season and active operations in oil refineries.

Forecasts and market impact

In the next year, investors will pay attention to the U.S. Federal Reserve's policy. The central bank forecasts two interest rate cuts compared to four in September due to high inflation.

Changing interest rate expectations in the U.S. and the interest rate differential between the U.S. and other economies have strengthened the dollar and impacted other currencies. This has made oil purchases more expensive for consumers outside the U.S., affecting demand.

Markets are also waiting for policies from newly elected President Donald Trump regarding deregulation, tax cuts, increased tariffs, and changes in immigration policy, which will contribute to inflation growth and impact the dollar.