Oil Prices Rise on U.S. Fed Rate Signals and China Property Support

Global Oil Prices Rise

Global oil prices climbed in early trade on Thursday, buoyed by signals from the U.S. Federal Reserve indicating a potential start to rate cuts. Additionally, China unveiled new support measures for its struggling property market, further supporting the upward trend.

Oil Futures Surge

Oil futures rose 46 cents, or 0.6%, to $81.03 a barrel, while U.S. West Texas Intermediate crude futures gained 47 cents, or 0.6%, to $76.33 at 0140 GMT. This upward movement comes after a previous session that saw a decline of over $2 a barrel.

Federal Reserve’s Impact

Federal Reserve Chair Jerome Powell’s announcement that interest rates had peaked and would move lower in the coming months, along with lower-than-expected U.S. labor cost increases, reinforced the notion that the central bank could initiate rate cuts by June.

China’s Property Support

China, the world’s second-largest economy, introduced new property support measures amidst concerns about the fallout from the liquidation of developer Evergrande. This move comes as the country experienced its worst declines in new home prices in nearly nine years at the end of last year.

Oil Demand Growth

Analysts at JPMorgan expect China to remain the largest contributor to global oil demand growth this year, forecasting a surge of 530,000 barrels per day in 2024, following a 1.2 million bpd increase last year. They also recommend using December’s sell-off as a buying opportunity, predicting a fundamentally healthy year for the oil market in 2024.

Geopolitical Tensions

In the Middle East, concerns about attacks by Yemen-based Houthi forces on shipping in the Red Sea are driving up costs and disrupting global oil trading. The Houthi group stated that it would continue to carry out attacks on U.S. and British warships in the Red Sea in what it called acts of self-defense, adding further tension to the energy market.