Crude oil prices are currently striving to end the week on a positive note by aiming to close above the $70.00 mark. Traders find themselves in a dilemma, weighing the potential for a short-term upward movement against the likelihood of a long-term bearish outcome.
In the US trading session this Friday, crude oil is making its way back above $70.00. However, the market is hesitant to fully embrace the rally witnessed earlier in the week. The OPEC+ report did provide a boost to oil prices, yet traders remain cautious when considering the projections for 2025, especially with President-elect Donald Trump set to enter the White House. There are already several commitments in place for the US to increase oil drilling and become a larger exporter, which could exacerbate an already oversupplied market.
The US Dollar Index (DXY), which gauges the performance of the US dollar against a basket of currencies, is attempting to hold onto gains ahead of next week’s Federal Reserve meeting. The greenback is attracting inflows once again as the interest rate differentials between the US and China as well as Europe widen, strengthening its position. At present, West Texas Intermediate (WTI) crude oil trades at $70.37, while Brent Crude is at $73.80.
Oil News and Market Movers:
Abu Dhabi National Oil Co. (Adnoc) has reduced crude allocations to some Asian customers, as reported by equity and term lifters of the oil to Bloomberg.
Bloomberg analyst Pol Lezcano reports that weak fundamentals will put pressure on oil prices in 2025. The looming supply glut is expected to overshadow the impacts of war risks, sanctions, and OPEC+ cuts.
While the year-end scramble by US oil suppliers to lower their tax bills usually leads to a December jump in crude exports, seasonally low inventories on the Gulf Coast are likely to counter that trend, according to analysts cited by Reuters.
Oil Technical Analysis: A Shaky End to the Year
Despite the recent rally in crude oil prices, traders are approaching with caution and are hesitant to add to it. With the year-end approaching and the anticipation of a new US president who favors increased oil drilling, the upside potential appears limited. Any upward movement is expected to be short-lived, as profit-taking is likely to occur before 2024 concludes.
The 55-day Simple Moving Average (SMA) at $70.06 is currently being tested. For it to serve as support, there needs to be a hold and a daily close above this level. Moving higher, $71.46 and the 100-day SMA at $71.12 will pose significant resistance. If oil traders can break through this resistance level, $75.27 will become the next crucial level.
On the downside, it’s still uncertain whether the 55-day SMA at $70.06 will be reclaimed. In that regard, $67.12, which supported the price in May and June 2023, remains the first solid support nearby. Should this level break, the 2024 year-to-date low of $64.75 will come into play, followed by $64.38, the low from 2023. As the year winds down, the future direction of crude oil prices remains highly uncertain, influenced by a multitude of factors both on the supply and demand sides as well as broader economic and geopolitical considerations.
Related topics:
OPEC Cuts Oil Demand Forecast Again, Commerzbank Analyzes Outlook
Crude Oil Lingering Around $70.00 as Traders Weigh Future Direction
Oil Rises on Tighter Sanctions Prospects Despite Global Supply Concerns
