Oil set for weekly gains as market eyes Chinese policy support

LONDON: Oil prices fell slightly on Friday but remained poised for weekly gains after closing at their highest in more than two months in the previous session, underpinned by potential further economic stimulus in China and lower U.S. interest rates.

Brent crude futures were down 34 cents at $75.59 a barrel by 1058 GMT after settling on Thursday at the highest level since Oct. 25. U.S. West Texas Intermediate crude dipped by 35 cents to $72.78, with Thursday’s close its highest since Oct. 14.

Brent was on track for a 1.9% weekly gain while WTI was set for a 3% increase.

Signs of Chinese economic fragility heightened expectations of policy measures to boost growth in the world’s top oil importer.

“As China’s economic trajectory is poised to play a pivotal role in 2025, hopes are pinned on government stimulus measures to drive increased consumption and bolster oil demand growth in the months ahead,” said StoneX analyst Alex Hodes.

China announced a couple of new measures to boost growth for its fragile economy this week with a surprise move to raise wages for government workers and announcement of a sharp increase in funding from ultra-long treasury bonds. The additional funding is to be used to spur business investment and consumer-boosting initiatives.

Oil prices set for second annual loss in a row

Investors are also watching for further interest rate cuts by the Federal Reserve this year to support the U.S. economy.

Lower rates can boost economic growth and demand for oil, with lower borrowing costs also helping to boost consumption.

Oil is likely to have gained some price support from colder weather forecast in some regions.

“Oil demand is likely benefiting from cold temperatures across Europe and the U.S.,” said UBS analyst Giovanni Staunovo.

U.S. crude stockpiles fell less than expected last week, dropping by 1.2 million barrels to 415.6 million barrels. Analysts had expected a draw of 2.8 million barrels.

Meanwhile, U.S. gasoline and distillate inventories jumped as refineries ramped up output, though fuel demand hit a two-year low.