Investing.com– Oil prices settled higher Friday after data showed weekly inventories fell more than expected.

At 2:30 p.m. ET (19:30 GMT), rose 1.2% to $74.17 a barrel, and settled higher at $70.60 a barrel.

Trading volumes were thin ahead of the new year’s start as many institutional investors and traders typically take time off during the holiday season. Additionally, year-end profit-taking and portfolio rebalancing reduce trading activity. 

US crude inventories fall more than expected

The U.S. Energy Information Administration (EIA), the statistical arm of the U.S. Department of Energy, reported Friday crude stockpiles for week ended Dec. 20 fell 4.2M barrels, compared with expectations for a decline of just 700,000 barrels.

This drawdown indicates a tightening supply in the U.S. crude oil market, which has implications for global oil prices. Following the API’s report, oil prices had edged higher, supported by hopes for additional fiscal stimulus in China and the reported decline in U.S. crude inventories.

Gasoline inventories rose by 1.6 million barrels last week, while distillate inventories—which include diesel and heating oil—fell by about 1.7 million barrels.

China stimulus hopes persist

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 to better utilize public funding for economic growth, a government document showed on Wednesday.

On Thursday, the World Bank revised its economic growth forecast for China upward for 2024 and 2025 but cautioned that weak household and business confidence, combined with challenges in the property sector, would continue to hinder growth in the coming year.

The outlook for oil demand hinges on the hope that China, the world’s largest oil importer, can revive its economy, especially as there are concerns about a potential oversupply due to expected increases in production from non-OPEC countries.

Ayushman Ojha contributed to this report.