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Weaker than expected Chinese data raises hopes of further

stimulus

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Volumes remain thin on first trading day of the year

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Investors await US manufacturing data and oil inventories

(Updates prices, adds comment and changes dateline to London)

By Anna Hirtenstein

LONDON, Jan 2 (Reuters) - Oil prices rose on Thursday as

investors returned for the first trading day of the new year

with an optimistic eye on China's economy and fuel demand after

a pledge by President Xi Jinping to promote growth.

Brent crude futures rose 65 cents, or 0.87%, to

$75.29 a barrel by 0945 GMT after gaining 65 cents on Tuesday,

the last trading day of 2024. U.S. West Texas Intermediate crude

was up 66 cents, or 0.92%, at $72.38.

Xi's New Year address on Tuesday said that China would implement

more proactive policies to promote growth in 2025.

China's factory activity grew in December, a Caixin/S&P Global

survey showed on Thursday, but at a slower pace than expected in

the face of concerns over how tariffs proposed by U.S.

President-elect Donald Trump will affect the trade outlook.

The data echoed an official survey released on Tuesday, which

showed that China's manufacturing activity barely grew in

December. However, services and construction fared better, with

the data suggesting that policy stimulus is trickling into some

sectors.

Weaker Chinese data is seen by some analysts as positive for

oil prices because it could prompt Beijing to accelerate its

stimulus programme.

Traders are returning to their desks and probably weighing

higher geopolitical risks and Trump running the U.S. economy red

hot against the expected impact of tariffs, said IG market

analyst Tony Sycamore.

"Tomorrow's US ISM manufacturing release will be key to

crude oil's next move," Sycamore said.

Sycamore said WTI's weekly chart is winding itself into a

tighter range, suggesting that a big move is coming.

"Rather than trying to predict in which way the break will

occur, we would be inclined to wait for the break and then go

with it," he added.

Investors are also awaiting weekly U.S. oil stocks data from

the Energy Information Administration, which was postponed to

Thursday because of the New Year holiday.

U.S. crude oil and distillate stockpiles are expected to have

fallen last week while gasoline inventories are expected to have

risen, an extended Reuters poll showed on Tuesday.

October's oil demand reached the highest level since the

COVID-19 pandemic at 21.01 million barrels per day (bpd), up

about 700,000 bpd from September, EIA data showed on Tuesday.

Crude output from the world's top producer rose to a record

13.46 million bpd in October, up 260,000 bpd from September, the

report showed.

Oil prices are likely to be constrained near $70 a barrel in

2025, down for a third year after a 3% decline in 2024, with

weak Chinese demand and rising global supplies offsetting OPEC+

efforts to shore up the market, a Reuters poll showed.

In Europe, Russia halted gas pipeline exports through Ukraine on

New Year's Day after the transit agreement expired on Dec. 31.

The European Union has arranged alternative supply ahead of the

widely expected stoppage while Hungary will keep receiving

Russian gas via the TurkStream pipeline under the Black Sea.