China stimulates ANS

Bulls cheer China 'loose money' plans, surprise US inventory draw

Steve Sutherlin

Petroleum News

Alaska North Slope crude soared $1.51 Dec. 11 to close at $71.96 per barrel, while West Texas Intermediate zipped $1.70 to close at $70.29 and Brent leapt $1.33 to close at $73.52.

China called for "appropriately loose" monetary policy in 2025, to spur its economy with the first easing of its stance in 14 years, Reuters reported Dec. 10.

Crude imports grew annually for the first time in seven months in November, up some 14% from a year prior, Chinese data showed.

"Oil prices managed to find a footing lately, as stronger policy signals from Chinese authorities have once again rekindled hopes for stronger stimulus measures..." said Yeap Jun Rong, market strategist at IG, adding that "price gains are constrained, as market participants want concrete details beyond the typical positive messaging."

U.S. commercial crude oil inventories -- excluding Strategic Petroleum Reserve oil -- decreased by 1.4 million barrels for the week ending Dec. 6, to 422.0 million barrels -- 6% below the five-year average for the time of year. U.S. Energy Information Administration said in a Dec. 11 data release.

Analysts polled by Reuters had called for a 900,000-barrel decline in crude.

Total motor gasoline inventories fell for the period by 5.1 million barrels to 219.7 million barrels -- 4% below the five-year average for the time of year, the EIA said.

The Reuters poll called for a 1.7 million barrel increase in gasoline.

Distillate fuel inventories increased by 3.2 million barrels to 121.3 million barrels -- 4% below the five-year average for this time of year, EIA data showed.

ANS rose 23 cents Dec. 10 to close at $70.46, as WTI rose 22 cents to close at $68.59 and Brent edged 5 cents higher to close at $72.19.

On Dec. 9, ANS fell 43 cents to close at $70.23, but the other benchmarks leapt, with WTI up $1.17 to close at $68.37 and Brent up $1.02 to close at $72.14.

ANS fell 41 cents both Dec. 6 and Dec. 5 to close at and $70.66 and $71.07 respectively.

WTI plunged $1.10 Dec. 6 to close at $67.20, while Brent slid 97 cents to close at $71.12.

On Dec. 5, WTI fell 24 cents to close at $68.30, and Brent fell 22 cents to close at $72.09.

From Wednesday to Wednesday, ANS gained 49 cents from its close of $71.47 Dec. 4 to $71.96 Dec. 11.

On Dec. 11, ANS closed at a $1.67 premium to WTI, while closing at a $1.56 discount to Brent.

Dollar stronger for longer

No matter what good news gets thrown at crude markets, a strong greenback checks price exuberance. Late 2024 is experiencing a very strong greenback. When a buyer must convert another currency to dollars, the net result is a higher price tag for the same number of barrels -- and for consumers in those markets, a wallet whacking at the gasoline pump.

"Markets have been betting that Donald Trump's policies will mean an even stronger dollar, with the currency up 5% against developed trading partners and 4% against emerging ones since the start of October, when Trump's win began to be priced in," said James Mackintosh, Wall Street Journal columnist Dec. 11.

There is a case for a strong dollar, Mackintosh said.

The economy is roaring, even before Trump's planned tax cuts and assault on red tape, he said. Much of the rest of the world is struggling, even without new tariffs.

"Trump wants to protect the dollar's reserve currency status, a status that increases demand for dollars elsewhere," Mackintosh said, adding that boosting oil and gas production would likely send energy exports ever higher.

"This seems like an open-and-shut case; stronger growth should mean a stronger currency; higher productivity, at least in the traded goods sector, ought to mean a stronger currency," he said, adding, "Naturally, the dollar is strong."

But a case for a weaker dollar does have its points.

"The best case I see for a weaker dollar is that it's already so strong that it's vulnerable to surprises," Mackintosh said. "If Japan's economy can generate internal demand and allow rate rises while Europe finds a way to boost productivity, much of the narrative around the strong dollar would dissipate."

If, on top of that, tariffs are used more selectively than expected and the budget deficit is reduced, the dollar should pull back significantly, he said.

Trump is a negotiator, and no path is assured for tariff negotiations, or for the schedule of other actions the new president or his appointees may take which might affect the dollar, he said.

In Trump's first term, the dollar initially jumped in expectation of tariffs, then retreated until the tariffs were imposed in 2018, he said. Following that, the dollar strengthened enough against the yuan to fully offset the tariffs.