Oil rose as strong US crude exports signaled firm global demand before paring gains after the Federal Reserve reduced the number of rate cuts it expects to make next year.
West Texas Intermediate advanced 0.7% to settle below $71 a barrel, while Brent edged higher to settle above $73. WTI’s gain shrank after the session as the Federal Reserve’s outlook for 2025 boosted the dollar, making commodities priced in the currency less attractive.
“Oil bulls are already trying to thread the needle here in 2025 with what needs to go right for higher prices,” Jon Byrne, an analyst at Strategas Securities, said about the rate decision. “The last thing they need is the dollar trending higher.”
Supporting prices for the US benchmark, Energy Information Administration data showed US crude exports rose 1.8 million barrels last week to the highest since July. The report also showed a fourth straight weekly decline in US oil inventories and a 3.18 million-barrel drawdown in distillate stockpiles.
“Stronger exports indicate an uptick in global demand, while strong draws in distillate are a very welcome reprieve from the sluggish industrial growth that has plagued most of 2024,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Reports that Kazakhstan intends to comply with OPEC+ quotas next year also dampened concerns about oversupply. The cartel member had unsettled markets by signaling that it would adhere to its original plan of raising oil output by 190,000 barrels a day, Babin said, despite OPEC’s decision to delay production hikes.
Crude has traded in a narrow band for the past two months, supported by geopolitical tensions in the Middle East and Europe, and the threat of further sanctions on supplies from Iran and Russia. Restraining prices are lackluster Chinese demand and expectations for robust production from non-OPEC+ nations such as the US, where President-elect Donald Trump has promised to encourage domestic development.
Oil Prices:
West Texas Intermediate for January delivery advanced 0.7% to settle at $70.58 a barrel in New York. The contract expires on Thursday. Brent for February settlement added 0.3% to settle at $73.39 a barrel.