SINGAPORE (Reuters) – Oil prices rose on Tuesday after data showed manufacturing activity in China expanded in December, but they were on track to fall for a second year in a row on worries about demand for primary consuming countries.

Futures rose 60 cents, or 0.8%, to $74.59 a barrel at 0530 GMT. US West Texas Intermediate crude gained 62 cents, or 0.9%, to $71.61 a barrel. For the year, Brent is down 3.2%, while WTI is down 0.1%.

China’s manufacturing activity expanded for a third straight month in December but at a slower pace, an official factory survey showed on Tuesday, suggesting that a blitz of new stimulus would help support in the world’s second largest economy.

Chinese authorities have also agreed to issue a record 3 trillion yuan ($411 billion) in special treasury bonds by 2025 to revive economic growth, Reuters reported last week.

The weaker outlook for China’s demand has forced the Organization of Petroleum Exporting Countries (OPEC) and the International Energy Agency (IEA) to cut their expected oil demand for 2025.

OPEC and its allies earlier this month delayed their plan to start raising output until April 2025 against a backdrop of falling prices. The IEA expects global oil supply to exceed demand by 2025 even if OPEC+ cuts remain in place, as increased production from the United States and other foreign producers outweighs slower demand.

While a weaker longer-term demand outlook weighs on prices, they will find short-term support from declining stockpiles, which are expected to have fallen by about 3 million barrels last week.

Brent and WTI were buoyed by a larger-than-expected drawdown from US crude inventories in the week ended December 20 as refiners ramped up activity and the holiday season boosted fuel demand. (EIA/S)

Investors’ focus next year will be on the Federal Reserve’s rate path after the central bank earlier this month planned just two rate cuts, up from four in September, due to stubbornly high inflation.

Lower interest rates generally encourage borrowing and fuel growth, which in turn is expected to increase oil demand,

Shifting expectations around US rates and widening interest rate differentials between the United States and other economies have boosted the dollar and weighed on other currencies.

A stronger dollar makes buying oil more expensive for consumers outside the United States, which weighs on demand.

Markets are also preparing for President-elect Donald Trump’s policies of looser regulation, tax cuts, tariff hikes and tighter immigration that are expected to be both pro-growth and inflationary — and ultimately dollar positive.