Investing.com– Oil prices climbed in Asian trading on Friday, driven by upbeat Chinese economic data that exceeded expectations and lifted market sentiment, however, gains were capped by easing geopolitical tensions in the Middle East.
At 21:35 ET (02:35 GMT), Brent Oil Futures were 0.4% higher at $81.63 a barrel, and Crude Oil WTI Futures expiring in March rose 0.5% to $78.24 a barrel.
Oil settled lower in the previous session as market participants booked profits after prices reached a four-month high earlier this week.
Expectations of Yemen’s Houthi militia announcing a halt in its attacks on ships in the Red Sea after a ceasefire deal between Israel and the militant Palestinian group Hamas, also exerted downward pressure on oil.
Strong Chinese data spurs optimism for increased demand
Chinese economy grew more than expected in the fourth quarter of 2024, bringing the annual gross domestic product (GDP) to 5%, which was in line with Beijing’s 5% growth target, data showed on Friday.
Other data showed that industrial production grew more than expected in December as recent stimulus measures from Beijing continued to support business activity.
December retail sales were also stronger-than-expected and accelerated sharply from the rise seen in the prior month.
The outlook for oil demand hinges on the hope that China, the world's largest oil importer, can revive its economy, especially as there are concerns about a potential oversupply due to expected increases in production from non-OPEC countries.
Anticipation of halt to Houthi attacks in the Red Sea limits gains
In the geopolitical arena, maritime security officials anticipate Yemen's Houthi militia to cease attacks on vessels in the Red Sea following a ceasefire agreement between Israel and Hamas.
Since November 2023, the Houthis have conducted over 100 attacks on ships, leading to significant disruptions in global shipping and increased insurance costs.
The expected halt in hostilities could restore confidence in these critical maritime routes, potentially stabilizing shipping operations and influencing crude oil supply chains.
U.S. sanctions on Russian oil provide support
In a strategic move, the U.S. has imposed new sanctions targeting Russian oil exports. The International Energy Agency (IEA) noted that these sanctions could disrupt Russia's oil supply chains, potentially tightening the global oil market.
The sanctions focus on entities responsible for over a third of Russian and Iranian crude exports in 2024, aiming to limit their ability to transport and sell oil. This development has raised concerns about potential supply shortages, contributing to the upward pressure on oil prices.
Oil prices had hit multi-month peaks earlier this week after the announcement was made, in anticipation of tightened supply.
The recent U.S. Energy Information Administration (EIA) showed a significant drawdown in crude oil inventories for the last week. This reduction further indicates a tightening supply.