Investing.com– Oil prices continued their uptrend in Asian Trade on Thursday after the Christmas holiday, bolstered by new stimulus measures in China and a drop in inventories.

At 06:01 ET (05:01 GMT), traded 0.5% higher to $73.97 a barrel, and also gained 0.5% to $70.01 a barrel.

Volumes were expected to be thin for the remainder of the holiday-shortened week.

Oil had risen more than 1% on Tuesday, and extended gains on Thursday after reports emerged around fresh stimulus measures from China. 

China’s fresh stimulus measures support oil prices

Chinese authorities have decided to issue a record-breaking 3 trillion yuan ($411 billion) in special treasury bonds next year, in an intensified fiscal effort to stimulate a struggling economy, Reuters reported on Tuesday.

Moreover, China is allowing local officials to broaden investments with key government bonds and simplifying approvals, permitting projects unless restricted by a cabinet-published list, to better utilize public funding for economic growth, a government document showed on Wednesday.

China’s economic growth is a key factor influencing global oil prices due to its status as the largest oil importer. When China’s economy thrives, its demand for crude oil rises to fuel industries, transportation, and other energy-intensive activities, often driving up oil prices. 

China’s economic recovery post-COVID-19 has faced significant hurdles, including weakening consumer confidence, faltering export demand, and a beleaguered property sector.

To counter the slowdown, Beijing has implemented several stimulus measures aimed at reviving growth.

Satoru Yoshida, a commodity analyst at Rakuten Securities, noted that oil prices are also being supported by anticipation of higher fossil fuel production and demand once U.S. President-elect Donald Trump assumes office next month.

US crude inventories shrink- API

US oil inventories fell by 3.2 million barrels during the week ended Dec. 20, media reports showed on Wednesday, citing the (API) data.

Gasoline inventories rose by 3.9 million barrels last week, while distillate inventories—which include diesel and heating oil—fell by about 2.5 million barrels.

The figures come ahead of data from the Energy Information Administration, the statistical arm of the US Department of Energy, due on Friday.

A Reuters poll on Tuesday projected that crude oil inventories likely declined by approximately 1.9 million barrels in the week ending December 20, with gasoline stocks expected to drop by 1.1 million barrels and distillate inventories by 0.3 million barrels.

Ayushman Ojha contributed to this report.