Crude Oil prices are on an upward trajectory, flirting with 1.5% gains on Thursday after experiencing three consecutive days of losses. The rally comes as the market eyes a potentially positive outlook for the first half of 2025.
A Bloomberg Intelligence forecast has provided a boost to the oil market. It suggests that US crude inventories could face sharp daily drawdowns in 2025, with the Bloomberg supply and demand calculator indicating a potential decline of roughly 537,000 barrels a day. While President-elect Donald Trump has pledged to increase domestic oil drilling, it will be some time before new sites and wells become fully operational. Meanwhile, there’s an expectation that demand could pick up under Trump’s reform programs, adding to the positive sentiment for oil prices.
The US Dollar Index (DXY), which gauges the performance of the US Dollar against a basket of currencies, is trading softer. It has retreated from a fresh over-two-year high reached on Wednesday, falling back below 108.00. Traders are unwinding or reducing their exposure to the US Dollar as the year-end approaches, following the Fed’s decision to lower its policy rate by 25 basis points as expected, yet with a hawkish tilt by signaling fewer rate cuts in 2025.
At the time of writing, West Texas Intermediate (WTI) Crude Oil trades at $70.22 and Brent Crude at $73.27.
In the oil market news, there are several developments worth noting. In North Dakota’s Bakken Oil formation, drillers produced 1.178 million barrels per day in October, the lowest since July, with production falling by 1.8% from the previous month and 6.2% from last year. China’s largest oil refiner has stated that the country’s gasoline demand peaked last year and will decline at an accelerating pace as the shift to electric vehicles gains momentum. Nigerian President Bola Tinubu is counting on increased oil revenue to fund the record spending outlined in the 2025 budget. Additionally, Glencore Plc has become an active buyer of spot oil cargoes from the Middle East for December for its Singapore refinery.
From a technical analysis perspective, there’s some hope for upside potential in Crude Oil prices in 2025. With the anticipation of increased production under Trump’s plans and a boost in demand, the market could see upward movement in the first quarter or first half of the year. Resistance levels are identified at $71.46 (February 5 low) and the 100-day Simple Moving Average (SMA) at $70.88. If oil traders manage to break through these levels, the next significant level will be $75.27 (January 12 high). However, as the year-end nears, quick profit-taking remains a factor to watch out for. On the downside, the 55-day SMA at $70.02 has lost its significance this week, and the first solid support level is at $67.12, which held prices in previous periods. In case this breaks, the 2024 year-to-date low of $64.75 comes into play, followed by $64.38, the low from 2023.
Overall, the crude oil market is navigating through a mix of supply and demand expectations, geopolitical influences, and technical factors as it heads towards the end of the year and looks ahead to 2025.
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