Oil prices continued to rise on Tuesday, buoyed by strong economic data from China and a weakening US dollar, which has been affected by political uncertainties in the region, while expectations that the US Federal Reserve (Fed) will adopt a more cautious approach to quantitative easing have capped further price increases.
The international benchmark Brent crude rose by 0.6% to $74.48 per barrel at 10.31 a.m. local time (0731 GMT), up from $74.04 at the close of the previous session.
The US benchmark West Texas Intermediate (WTI) increased by 0.6% to $71.34 per barrel, compared to its prior session close of $70.92.
China, the world's largest oil importer, announced measures to stimulate economic activity in the region supporting upward price movements by fueling expectations of stronger demand.
News that Chinese authorities have approved a record fiscal stimulus package worth 3 trillion yuan (approximately $411 billion) to boost the economy contributed to market optimism about future oil demand.
Experts suggest that the recent rise in crude prices is also affected by the positive indicators from China's non-manufacturing sector. The Purchasing Managers' Index (PMI) for China's non-manufacturing sector registered 52.2 in December, exceeding forecasts.
Meanwhile, China's manufacturing PMI for December came in at 50.1, slightly below expectations, though it remained in the expansion zone.
On the other hand, the potential impact of diplomatic and trade sanctions under US President-elect Donald Trump, continue to weigh on market sentiment.
Furthermore, the US dollar index, which measures the greenback against a basket of major currencies, fell by 0.11% to 108.01, further supporting higher oil prices. A weaker dollar makes oil more affordable for holders of other currencies, thus stimulating demand.
However, the anticipated prolonged fight against inflation in the US, has led to expectations that the Fed will take a more gradual approach to monetary easing.
While some analysts expect the Fed to implement two rate cuts in 2025, concerns over a more measured pace of interest rate reductions have tempered upward support on oil prices.
