By Ahmad Assiri

For the fourth consecutive day, Brent crude continues its upward move, posting a 4.5% gain amid optimism about a rebound in China’s economic activities, driven by government stimulus and a concerted push to accelerate economic growth. In his latest remarks, the Chinese President stated that proactive policies will be implemented to achieve economic growth in 2025 – a move that is expected to invigorate economic momentum, particularly in the manufacturing sector, which heavily depends on direct inputs from the energy sector.

Despite Brent’s trading liquidity remaining thin during the first trading day of 2025, the initial trend appears supportive of higher prices. However, general trading sentiment indicates that geopolitical risks loom on the horizon, especially with Trump’s inauguration approaching on January 20. His policy pledges could collide with ground realities, particularly concerning the Ukraine and ongoing Middle East tensions – potential catalysts for the reemergence of a risk premium in Brent prices. Still, whether this expectation holds or proves otherwise will become clearer with price movements in the coming days.

Although the average market outlook for 2025 suggests crude oil prices will hover around the mid-$70s per barrel, geopolitical risks will remain a recurring factor capable of driving oil prices toward new equilibrium levels. Similarly, increased optimism around industrial economic activity in China, in particular, may challenge the fundamental assumptions underpinning market forecasts.

At the start of the year, both these factors – geopolitical uncertainty and Chinese economic resurgence – are aligning positively, contributing to upward move in oil prices.

• Assiri is a Research Strategist at Pepperstone