Oil Prices Rise as China’s Manufacturing Growth Sparks Demand Optimism

Oil prices edged higher on Monday as strong manufacturing data from China renewed hopes for fuel demand growth, even as uncertainty over US tariffs and a Ukraine peace deal weighed on global economic sentiment.

China’s Economic Data Boosts Oil Prices

Brent crude rose 36 cents, or 0.5%, to $73.17 per barrel, while US West Texas Intermediate (WTI) crude climbed 34 cents to $70.10 per barrel. The increase came after official data showed China’s manufacturing activity expanded at its fastest pace in three months, with new orders and higher purchase volumes driving production.

The market is now turning its attention to China’s annual parliamentary meeting on March 5, where investors anticipate potential economic stimulus measures to support growth.

Tony Sycamore, an analyst at IG Markets, attributed the price rise to China’s National Bureau of Statistics (NBS) manufacturing PMI moving back into expansionary territory. However, he warned that the country’s broader economic outlook remains uncertain, with new US tariffs on Chinese exports set to take effect on March 4.

Goldman Sachs analysts struck a more optimistic tone, suggesting that China’s economy is showing stable to slightly improved activity heading into early 2025. However, they cautioned that US tariffs could trigger retaliatory trade measures, potentially impacting global trade flows.

Geopolitical Tensions and Market Sentiment

Oil markets have been volatile in recent months, with Brent and WTI posting their first monthly declines in three months amid growing fears over US trade policies and their impact on global economic growth.

Market confidence improved slightly on Sunday after a European summit reaffirmed strong support for Ukraine, following a tense meeting between Ukrainian President Volodymyr Zelensky and US President Donald Trump in Washington.

Zelensky expressed hope that relations with Trump could be repaired but emphasized the need for private negotiations. He also signaled readiness to sign a minerals agreement with the US, which could be crucial for Ukraine’s economic stability.

However, ING analysts, led by Warren Patterson, noted that the lack of a clear US stance on Ukraine has increased uncertainty over potential sanctions relief for Russian energy exports.

Adding to supply concerns, Russian refineries continue to face attacks, with reports of another fire at a plant in the city of Ufa. These disruptions raise fears about Russia’s ability to maintain refined product exports in the coming months.

Oil Market Outlook for 2025

Looking ahead, analysts expect oil prices to remain relatively stable, with Brent crude averaging around $74.63 per barrel in 2025, according to a Reuters poll. Any impact from US sanctions is expected to be balanced by sufficient global supply and potential progress in Russia-Ukraine peace talks.

Meanwhile, tensions persist over Iraq’s oil exports from the Kurdistan region. Despite US pressure on Iraq to resume shipments through Turkiye’s Ceyhan port, eight international oil firms operating in the region have refused to restart exports, citing a lack of clarity on commercial agreements and payment guarantees.

As markets navigate geopolitical risks, economic policy shifts, and supply concerns, oil prices are expected to remain sensitive to ongoing developments in China, Ukraine, and US trade policy.