Oil prices have surged to their highest levels in more than two months, fueled by hopes that global governments may introduce new policies to boost economic growth. This rise could lead to greater demand for fuel, supporting the upward trend in oil markets.
On Friday, Brent crude futures climbed to $76.09 per barrel, marking a 0.2% increase, while U.S. West Texas Intermediate crude reached $73.32 per barrel, up 0.3%. Both benchmarks achieved their strongest levels since October and are set for a second consecutive weekly gain. The return of investors after the holiday season has improved trade activity and market liquidity, further driving prices upward.
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The economic outlook for 2025 is being closely watched, particularly as factory activity in Asia, Europe, and the U.S. wrapped up 2024 on a subdued note. Trade risks stemming from the second presidency of Donald Trump and China’s fragile economic recovery have dampened expectations for strong growth. Analysts from Capital Economics noted that manufacturing and GDP growth in Asia are likely to remain slow in the near term. They also predict that many Asian central banks will adopt looser monetary policies to counter low inflation and sluggish growth.
Lower interest rates typically spur economic activity, which in turn can boost fuel consumption. Investors are now eyeing potential interest rate cuts by the U.S. Federal Reserve to support the American economy, while China’s President Xi Jinping has pledged proactive measures to stimulate growth. Analysts believe that China’s economic recovery will play a crucial role in shaping oil demand throughout 2025. Stimulus policies are expected to encourage greater consumption, further bolstering oil prices.
In the U.S., fuel demand recently fell to its lowest point in two years, even as gasoline and distillate inventories saw significant increases. Refineries ramped up production, but crude stockpiles dropped by only 1.2 million barrels last week, falling short of the expected 2.8-million-barrel decrease.
Meanwhile, weather forecasts are also influencing the oil market. Anticipated cold snaps in the U.S. and Europe could lead to increased demand for diesel as an alternative to natural gas for heating. This seasonal demand is expected to add further upward pressure on oil prices in the coming weeks.
With hopes pinned on supportive policies and improving economic conditions, the oil market is gaining momentum, signaling potential growth in global energy demand. This upward trend in prices reflects growing optimism about the future, as governments and central banks take steps to foster economic recovery.
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