Oil Swings Back To Gains As Investors Suddenly Hopeful (Again) For China

Meanwhile, Hess is bullish about 2025 - but warns of volatility: File Image/Pixabay

In what is proving to be see-saw oil trading early in the New Year, traders on Tuesday reversed course yet again and sent crude prices upward based on the notion of improved demand in China as well as tighter supplies in Iran due to actions from Washington.

As of 1618 GMT, Brent rose 78 cents to $77.08, and West Texas Intermediate advanced 51 cents to $74.07.

Razan Hilal, a market analyst at Forex, set the stage for bullish sentiment by stating in a note, "While the market is currently range-bound, it is recording gains on the back of improved demand expectations, fueled by holiday traffic and China's economic pledges."

A focus on Iran was triggered by Washington on Tuesday ramping up sanctions against Iran, targeting what is known as Tehran's "shadow fleet" of illicit Iranian vessels supplying foreign markets with petroleum.

Still, Tuesday's gains were likely just a blip in an overall bearish market, and Harry Tchilinguirian, head of research at Onyx Capital Group, pointed out that technical indicators for oil futures were overbought and sellers were keen to take advantage of the strength, thus tempering additional price rises.

For some, the market was looking better in the longer term: John Hess, CEO of Hess, told investors at the Goldman Sachs Energy, CleanTech and Utilities Conference in Miami that while the market could be volatile this year, he viewed oil as more balanced than oversupplied, despite worries about global demand and greater production.

He said, "Demand is a little more robust than people thought," and he added that expected inventory builds of a million barrels per day have already been cut by half.

Meanwhile, a Wall Street Journal survey produced mixed projections about U.S. inventories: according to the average estimate of nine analysts and traders, crude stocks are expected to have fallen for the seventh straight week by 1 million barrels to 414.6 million barrels in the week ended Jan. 3; but gasoline inventories were forecast to have risen by 500,000 barrels to 231.9 million barrels in an eighth consecutive weekly rise.

An official inventory report from the Energy Information Administration is scheduled for release Wednesday.