OIL FUTURES: Crude higher as China data fuel demand optimism

Crude oil futures were higher in midmorning Asian trade Dec. 31 after manufacturing activity in China expanded for the third consecutive month, fueling optimism over the state of the country's economic recovery, while markets hover on the brink of a new era marked by trade uncertainties as 2024 readies its curtain call.

At 11:05 am Singapore time (0305 GMT), the ICE March Brent futures contract was up 33 cents/b (0.45%) from the previous close at $74.32/b, while the NYMEX February light sweet crude contract rose 36 cents/b (0.51%) to $71.35/b.

China's Manufacturing Purchasing Managers' Index stood at 50.1 in December, inching down from 50.3 the month prior, marking the third consecutive month of expansion, National Bureau of Statistics data showed Dec. 31.

Despite the slower pace, the index remains above the 50-mark that separates expansion from contraction, signaling a blitz of fresh stimulus supporting the economy of the world's largest crude importer.

Markets now shift their attention to the release of the Caixin China General Manufacturing PMI due Jan. 2 for fresh cues.

This comes as China braces for uncertainty from the possibility of increased tariffs under the Trump administration in 2025, which continues to pose challenges to China's economic recovery.

Analysts emphasized that the pivotal question remains on whether Beijing can sufficiently boost domestic demand to counterbalance the economic downturn triggered by heightened US tariffs.

As 2024 readies its curtain call, global markets now stand on the precipice of a new era marked by trade uncertainties and aggressive US fiscal maneuvers.

The focus remains on how the Federal Reserve would react in terms of its monetary policy, should the proposed heightened tariffs fuel new inflationary woes, with consensus expecting that it would drive inflation higher while simultaneously stunting global growth.

"With President-elect Donald Trump's controversial tariff plans looming, investors brace for potential upheaval, wondering how these policies will shape the global trade landscape and influence US monetary strategies as we enter the new era of Trumpism," SPI Asset Management's Managing Partner Stephen Innes said Dec. 31.

Near-term prices were also supported on the back of expectations that US crude inventories are likely to decline in the week ended Dec. 27, analysts surveyed by S&P Global Commodity Insights said late Dec. 30.

Commercial crude stocks likely slipped 3.1 million barrels to around 413.7 million barrels -- marking the sixth consecutive week of decline -- placing inventories nearly 6% behind the five-year average of Energy Information Administration's data and at the lowest outright level since late September.

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

China's crude throughput down on weak refining margin

Chinese refineries are going to end 2024 with a reduction in month-over-month crude throughput in December, amid a weak refining margin despite fewer scheduled maintenance undergoing, refinery sources told Commodity Insights Dec. 30.

In December, 50 of China's state-run refineries and four mega private plants targeted to process 10.42 million b/d of crude, down from 10.54 million b/d in November, but higher from 10.19 million b/d a year ago, Commodity Insights data showed.

Accordingly, their utilization rate fell to 84.6% in December, from 85.6% in November, but still higher from 84% compared with the previous year.

State-owned refineries are the main contributors of the month-over-month reduction in December as 21 of the 50 state-owned refineries, covered by Commodity Insights, cut their respective utilization rates in December by 1-8 percentage points from November.

Dubai crude

Dubai crude swaps were higher and intermonth spreads were lower in midmorning trade in Asia Dec. 31 from the previous close.

The February Dubai swap was pegged at $73.85/b at 10 am Singapore time (0200 GMT), up 71 cents/b (0.97%) from the Dec. 30 Asian market close.

The January/February Dubai swap intermonth spread was pegged at 66 cents/b at 10 am, stable over the same period, and the February/March intermonth spread was pegged at 52 cents/b, down 2 cents/b.

The February Brent/Dubai EFS was pegged at 96 cents/b, up 1 cent/b.