(Bloomberg) — Oil rose after strong U.S. crude exports signaled robust global demand, before paring gains after the Federal Reserve scaled back the number of interest rate cuts it expects to make next year.
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West Texas Intermediate rose 0.7% to settle below $71 a barrel, while Brent rose to above $73. WTI’s gains shrank after the session as the Federal Reserve’s 2025 outlook boosted the dollar, making commodities priced in the currency less attractive.
“Oil bulls are already trying to draw a thread here in 2025 with what should go well for higher prices,” said Jon Byrne, analyst at Strategas Securities, about the interest rate decision. “The last thing they need is for the dollar to rise.”
Data from the Energy Information Administration supports prices for the U.S. benchmark, showing U.S. crude oil exports rose 1.8 million barrels last week to the highest level since July. The report also showed a fourth consecutive weekly decline in U.S. oil inventories and a 3.18 million barrel decline in distillate inventories.
“Stronger exports signal a rise in global demand, while a sharp decline in distillates is a very welcome reprieve from the sluggish industrial growth that has plagued most of 2024,” said Rebecca Babin, senior energy trader at CIBC Private Wealth Group.
Reports that Kazakhstan plans to meet OPEC+ quotas next year also tempered concerns about oversupply. The cartel member had unsettled markets by signaling it would stick to its original plan to increase oil production by 190,000 barrels per day, Babin said, despite OPEC’s decision to postpone production increases.
Crude oil has traded in a narrow range over the past two months, supported by geopolitical tensions in the Middle East and Europe, and the threat of further sanctions on supplies from Iran and Russia. Prices are held back by subdued Chinese demand and expectations for robust production from non-OPEC+ countries such as the US, where President-elect Donald Trump has pledged to boost domestic development.
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