Oil prices steady as US storm threat fades, China stimulus falls short

Photo : Reuters

Oil prices remained largely unchanged on Monday as concerns over potential supply disruptions from a US storm dissipated, and following a disappointing stimulus plan from China that failed to meet market expectations for boosting fuel demand growth in the world’s second-largest oil consumer.

By 0916 GMT, Brent crude futures had dropped by 9 cents, or 0.1%, to $73.78 a barrel, while US West Texas Intermediate (WTI) crude futures stood at $70.23 a barrel, down 15 cents or 0.2%. Both benchmarks had experienced a drop of more than 2% on Friday.

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The lackluster response to China’s stimulus package, unveiled at a National People’s Congress (NPC) standing committee meeting on Friday, disappointed investors. Market analysts noted that the measures, which primarily targeted housing and consumption, fell short of expectations. IG market analyst Tony Sycamore remarked that the plan’s unclear forward guidance pointed to only modest support, thus failing to provide a boost to China’s oil demand growth or crude oil imports.

Tamas Varga, an analyst at oil broker PVM, agreed, stating that the stimulus measures would not revive China’s oil consumption or crude imports, which had already been under pressure due to China’s slowing economic growth. In particular, gasoline usage has declined as the rapid growth of electric vehicles has begun to displace traditional gasoline consumption, and liquefied natural gas (LNG) has largely replaced diesel for trucking.

As for oil consumption in China, the world’s major driver of global oil demand growth, it has been barely growing in 2024. This stagnation has been linked to a number of factors including economic deceleration and a transition towards cleaner energy alternatives.

Following the attention given to the US presidential election last week, Varga observed that attention was shifting back to the more fundamental issues that are affecting the oil market.

Additionally, oil prices had been weighed down by concerns that potential disruptions in supply from Storm Rafael in the US Gulf of Mexico were unlikely to result in long-term impact. As of Sunday, over a quarter of US Gulf oil output and 16% of natural gas production remained offline, according to the offshore energy regulator. However, the threat of further disruptions has since subsided.

Looking ahead, there were growing concerns about a potential rise in US oil and gas output, particularly under the new administration. Tim Evans, an analyst at Evans Energy, suggested that although the forecast for 2025 US oil production was unlikely to change, producers may be cautious about ramping up supply too aggressively. This hesitation, he argued, could stem from OPEC+ plans to gradually raise production targets in the coming year.

Meanwhile, the potential impact of US President Donald Trump’s election promise of higher import tariffs to boost the US economy continued to cast a shadow over the global economic outlook. However, analysts also pointed out that Trump could tighten sanctions on OPEC members like Iran and Venezuela, potentially leading to reductions in oil supply on global markets. This prospect had helped boost oil prices by more than 1% last week.