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Investing.com – Oil prices rose in Asian trade on Friday, driven by stronger-than-expected Chinese economic data and a boost to market sentiment, however, gains were offset by to reduce political tension in the Middle East.
At 21:35 ET (02:35 GMT), they were up 0.4% at $81.63 a barrel, and expiration in March was up 0.5% at $78.24 a barrel.
Oil fell below the previous session’s lows as market participants held on to gains after prices hit a four-month high earlier this week.
The prospect of Yemen’s Houthi militias announcing an end to naval attacks in the Red Sea following a ceasefire agreement between Israel and the Palestinian militant group Hamas, has also put downward pressure on oil.
China’s strong data raises hopes for rising demand
The Chinese economy exceeded expectations in the fourth quarter of 2024, bringing in 5%, which was in line with Beijing’s growth target of 5%, data showed on Friday.
Other data showed it grew more than expected in December as recent stimulus measures from Beijing continued to support business activity.
December was also stronger than expected and was much faster from the rise seen last month.
The outlook for oil demand is based on hopes that China, the world’s largest oil exporter, can revive its economy, especially as there are concerns about a possible increase in oversupply due to an expected increase in production from non-OPEC countries.
The prospect of halting Houthi attacks in the Red Sea diminishes the gains
On the political front, maritime security officials expect Yemen’s Houthi militia to stop attacking ships in the Red Sea following a ceasefire agreement between Israel and Hamas.
Since November 2023, the Houthis have carried out more than 100 attacks on ships, causing significant disruption to global shipping and increasing insurance costs.
A predictable cessation of hostilities could restore confidence in these critical sea lanes, stabilize shipping operations and stimulate supply chains.
US sanctions on Russian oil provide support
In a policy move, the US has imposed new sanctions targeting Russian oil sales. The International Energy Agency (IEA) noted that these sanctions could disrupt Russian oil supply chains, which is an opportunity to stabilize the global oil market.
The sanctions target entities responsible for more than a third of Russia’s and Iran’s exports by 2024, aiming to limit their ability to transport and sell oil. This development has raised concerns about a potential supply shortage, which has contributed to upward pressure on oil prices.
Oil prices had hit multi-month highs earlier this week after the announcement, on expectations of tight supply.
The latest US Energy Information Administration (EIA) showed a sharp decline in crude oil production last week. This reduction also reflects increased supply.
