- Oil prices are rising nearly 1% and investors are set to head out for Christmas.
- Markets are catching up with some news reports about further stimulus in China, one of the world’s biggest consumers.
- The U.S. Dollar Index is trading just below its current two-year high as volatility declines.
Oil prices are higher on Tuesday, and investors are waiting for Christmas Eve rather than the publication of the American Petroleum Institute (API). Even headlines about further stimulus in China are driving oil prices higher in the US trading session: Chinese policymakers want to stimulate the economy with a 3 trillion yuan bond injection, which should escalate spending and result in increased demand for oil from one of the world’s largest consumers.
The US Dollar Index (DXY) – which measures the performance of the US Dollar (USD) against a basket of currencies – remains just below its highest level in two years. In the last hours of trading before Christmas, volatility in the US dollar exchange rate is decreasing. At its current position, a novel two-year high could be reached before the end of the year.
At the time of writing, crude oil (WTI) was trading at $69.95 and Brent crude was trading at $72.85.
Oil News and Factors Affecting the Market: Demand in China is rising
- Policymakers in China plan to sell a record 3 trillion yuan ($411 billion) of special government bonds in 2025. According to Reuters, the government is trying to support consumption subsidies, business equipment upgrades, as well as investments in key technologies and advanced manufacturing sectors.
- Indian oil refiners are struggling to buy as much Russian crude as they need, people familiar with the matter told Bloomberg.
- Methane emissions in the U.S. Permian Basin fell 26% last year, according to a study by S&P Global Commodity Insights, as operations tightened and novel technologies were implemented to stop leaks of the powerful greenhouse gas.
- At 21:30 GMT, the American Petroleum Institute (API) will release its weekly crude oil inventory change. The previous week saw a decline of 4.7 million barrels.
Oil Technical Analysis: Trying to Close Above $70
Oil prices are not jumping significantly despite headlines that China is set to boost its local demand with a massive 3 trillion yuan (CNH) injection. This should be beneficial for local oil demand as China is one of the world’s largest consumers. The fact that the stimulus plan still needs to be finalized and that several market participants are not trading on Tuesday makes a gigantic move in oil prices very unlikely.
Looking higher, the 100-day plain moving average (SMA) at $70.76 and $71.46 (February 5 low) is a robust resistance level nearby. If further positive tailwinds emerge to support crude oil, the next key level will be $75.27 (January 12 high). However, beware of quick profit taking as the end of the year is swift approaching.
On the other hand, $67.12 – the level that held the price in May and June 2023 and into the final quarter of 2024 – still represents the first solid support nearby. If it is broken, the 2024 low will be $64.75, followed by the 2023 low at $64.38.
US WTI Crude Oil: Daily Chart
