Oil Prices on track for weekly gain amid China recovery hopes
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Oil prices edged higher on Friday, poised for weekly gains as optimism around China’s economic stimulus measures lifted demand expectations. However, a stronger U.S. dollar capped upside potential, highlighting ongoing headwinds for the market.
Market Drivers
China Recovery Expectations
Brent crude rose 14 cents to $73.40 per barrel, while WTI crude gained 17 cents to $69.79 per barrel by 0750 GMT. Both benchmarks are set for weekly gains, with Brent up 0.6% and WTI rising 0.5%.
The World Bank revised its growth forecast for China for 2024 and 2025, citing fiscal support measures. However, subdued consumer and business confidence and challenges in the property sector remain key risks.
China plans to issue 3 trillion yuan ($411 billion) in special treasury bonds next year, signaling Beijing’s intent to bolster its slowing economy.
U.S. Dollar Strength
A stronger dollar, trading near a two-year high, continues to weigh on oil prices, making crude more expensive for holders of other currencies.
The Greenback’s strength stems from the Federal Reserve’s signal of fewer rate cuts in 2025, maintaining robust demand for the currency.
U.S. Inventory Data
Preliminary data from the American Petroleum Institute (API) showed a 3.2 million barrel decline in U.S. crude stocks for the week ending December 20.
The official report from the U.S. Energy Information Administration (EIA), due at 1800 GMT, is expected to show a smaller draw of 1.9 million barrels. Analysts also forecast declines of 1.1 million barrels in gasoline and 0.3 million barrels in distillates.
Technical Outlook Support Levels
WTI: Immediate support lies at $69.50, with stronger support at $68.80, where buying interest could emerge.
Brent: Key support is at $72.80, followed by $72.00.
Resistance Levels
WTI: Resistance is seen at $70.20, with a breakout potentially leading to $71.00.
Brent: Resistance is at $73.80, with $74.50 as the next target for bulls.
Outlook and Strategy
Oil markets remain supported by China’s economic recovery expectations and U.S. inventory draws, but the stronger dollar and concerns over global demand growth in 2025 could limit gains.
Short-Term View
Prices are likely to stay range-bound as traders await the EIA report for confirmation of inventory declines. Positive data could reinforce weekly gains, while weaker-than-expected draws might prompt short-term selling pressure.
Long-Term Considerations
China’s fiscal measures and the trajectory of the U.S. dollar will remain pivotal in shaping oil prices heading into 2025. Investors should monitor macroeconomic trends and potential supply disruptions for further direction.
For now, Brent and WTI maintain a cautiously bullish outlook, supported by fundamentals but tempered by currency strength and demand uncertainties.
Market Drivers
China Recovery Expectations
Brent crude rose 14 cents to $73.40 per barrel, while WTI crude gained 17 cents to $69.79 per barrel by 0750 GMT. Both benchmarks are set for weekly gains, with Brent up 0.6% and WTI rising 0.5%.
The World Bank revised its growth forecast for China for 2024 and 2025, citing fiscal support measures. However, subdued consumer and business confidence and challenges in the property sector remain key risks.
China plans to issue 3 trillion yuan ($411 billion) in special treasury bonds next year, signaling Beijing’s intent to bolster its slowing economy.
U.S. Dollar Strength
A stronger dollar, trading near a two-year high, continues to weigh on oil prices, making crude more expensive for holders of other currencies.
The Greenback’s strength stems from the Federal Reserve’s signal of fewer rate cuts in 2025, maintaining robust demand for the currency.
U.S. Inventory Data
Preliminary data from the American Petroleum Institute (API) showed a 3.2 million barrel decline in U.S. crude stocks for the week ending December 20.
The official report from the U.S. Energy Information Administration (EIA), due at 1800 GMT, is expected to show a smaller draw of 1.9 million barrels. Analysts also forecast declines of 1.1 million barrels in gasoline and 0.3 million barrels in distillates.
Technical Outlook Support Levels
WTI: Immediate support lies at $69.50, with stronger support at $68.80, where buying interest could emerge.
Brent: Key support is at $72.80, followed by $72.00.
Resistance Levels
WTI: Resistance is seen at $70.20, with a breakout potentially leading to $71.00.
Brent: Resistance is at $73.80, with $74.50 as the next target for bulls.
Outlook and Strategy
Oil markets remain supported by China’s economic recovery expectations and U.S. inventory draws, but the stronger dollar and concerns over global demand growth in 2025 could limit gains.
Short-Term View
Prices are likely to stay range-bound as traders await the EIA report for confirmation of inventory declines. Positive data could reinforce weekly gains, while weaker-than-expected draws might prompt short-term selling pressure.
Long-Term Considerations
China’s fiscal measures and the trajectory of the U.S. dollar will remain pivotal in shaping oil prices heading into 2025. Investors should monitor macroeconomic trends and potential supply disruptions for further direction.
For now, Brent and WTI maintain a cautiously bullish outlook, supported by fundamentals but tempered by currency strength and demand uncertainties.