Oil prices rise slightly as 2024 ends steady amid surplus concerns

Oil prices showed modest gains in light trading, closing 2024 on a steady note as the market braces for a potential global surplus in the coming year, according to Bloomberg.

West Texas Intermediate (WTI) crude rose 1% to settle at $71.72 per barrel, achieving a slight yearly increase of 7 cents. Meanwhile, Brent crude climbed 0.3% to close at $74.64 per barrel, marking a 3.1% annual decline.

On Tuesday, oil prices surged following signs of recovery in China, the world’s largest oil importer. Manufacturing activity expanded for the third consecutive month, signaling growing economic momentum.

Chinese President Xi Jinping further bolstered market optimism by announcing that the country's GDP is expected to grow by approximately 5% in 2024, aligning with official targets. These developments drove bullish bets on WTI crude to a four-month high in the penultimate week of the year, as investors anticipated potential gains in the new year.

Since mid-October, crude oil prices have remained within a narrow trading range, influenced by opposing market forces. Geopolitical tensions in regions such as the Middle East and Ukraine have provided upward pressure on prices.

2025 Predictions

However, expectations of an increased global supply in 2025 have weighed heavily on the market, with some banks forecasting continued weakness in crude oil prices over the next two years.

Geopolitical developments could still create short-term volatility in the market. Donald Trump’s potential return to the White House in 2025 has added an element of uncertainty, with his nominee for National Security Advisor, Mike Waltz, pledging to reinstate the "maximum pressure" campaign on Iran. This policy significantly reduced Iran's crude exports during Trump’s previous term.

Despite these challenges, market experts remain cautious. John Driscoll, director and founder of Singapore-based consultancy JTD Energy Services, told Bloomberg, “I wouldn’t buy into this steep decline. However, we might witness greater discipline from oil-producing nations, and surprises such as geopolitical events or extreme weather conditions cannot be ruled out.”

As 2024 comes to an end, the oil market remains a complex interplay of economic recovery, geopolitical risk, and evolving supply-demand dynamics.