OIL FUTURES: Crude rises on US crude drawdown expectations; market braces for economic shift in 2025

Crude oil futures were higher in midmorning Asian trade Dec. 24 on expectations of a fifth straight drawdown in US crude inventories, while the Federal Reserve braces for a sweeping economic change while combating inflation under the Trump administration in 2025.

At 10:41 am Singapore time (0241 GMT), the ICE February Brent futures contract was up 46 cents/b (0.63%) from the previous close at $73.09/b, while the NYMEX February light sweet crude contract rose 37 cents/b (0.53%) to $69.61/b.

Global oil markets saw near-term support on the back of expectations that US crude stocks are likely to fall in the week ended Dec. 20 amid steady refinery demand, analysts surveyed by S&P Global Commodity Insights said late Dec. 23.

Commercial crude stocks likely declined 3.3 million barrels to around 417.7 million barrels -- marking the fifth straight week of declining inventories -- placing stocks 5% behind the five-year average of Energy Information Administration data and at the lowest outright level since late September.

More definitive numbers are due for release by the American Petroleum Institute and EIA.

Analysts noted that while oil prices had been stabilizing in a trading range, the complex could see further upside as the predicted glut of oil supplies has yet to be seen.

"This comes as Iran is trying to dump 20 million barrels of oil before sanctions really start to bite; this may be Iran's best chance to get rid of some oil before Trump sanctions hit," PRICE Futures Group's Senior Market Analyst Phil Flynn said late Dec. 23.

As 2025 approaches, markets are starting to reckon with the prospects for sweeping economic changes under President-elect Donald Trump's second presidency as he takes office Jan. 20, 2025.

It remains to be seen how the narrative of higher tariffs proposed by Trump would shape the global economy, particularly on the inflationary front.

"2024 has been a year of resilience, with solid growth in card spending backed up by robust after-tax wage and salary growth," Bank of America Institute said late Dec. 23, adding that "we also saw a fairly healthy labor market this year".

Nonetheless, Fed Chair Jerome Powell said the Fed remained confident price pressures would continue to ease while echoing cautiousness on the pace of the rate cuts, as the central bank projects just two 25-basis-point rate reductions by the end of 2025.

Market consensus expect the Fed to start the new year with a pause in its monetary policy easing by maintaining the Fed Fund rates at 4.25%-4.5% following its meeting over Jan. 28-29, with the probability standing at 93.6%, according to the CME's FedWatch tool.

Iran's oil fortunes take a hit from geopolitics

Iran has seen a sizable increase in its crude output since 2022 when Russia invaded Ukraine and Western governments shifted their sanctions focus away from Tehran.

However, Donald Trump's election victory as US president, as well as ongoing Middle East conflicts, will likely see Iranian oil growth stall and threaten the country's plans to increase its production capacity, analysts said.

Iran, which pumped 3.22 million b/d of crude in November according to the Platts OPEC+ survey by Commodity Insights, aims to raise its production capacity by 200,000 b/d by March and a further 400,000 b/d in the following Iranian year.

Trump's expected maximum-pressure campaign could tighten Iran's upstream access to foreign capital further, although analysts do not expect as drastic of a drop in Iranian production as when the US withdrew from the nuclear deal and reimposed sanctions in 2019, during Trump's first term in office.

Dubai crude

Dubai crude swaps and intermonth spreads were lower in midmorning trade in Asia Dec. 24 from the previous close.

The February Dubai swap was pegged at $72.08/b at 10 am Singapore time (0200 GMT), down 18 cents/b (0.25%) from the Dec. 23 Asian market close.

The January/February Dubai swap intermonth spread was pegged at 45 cents/b at 10 am, down 2 cents/b over the same period, and the February/March intermonth spread was pegged at 44 cents/b, down 1 cent/b.

The February Brent/Dubai EFS was pegged at 78 cents/b, down 5 cents/b.