Crude oil prices have been hovering around $70.00 for two consecutive days. Traders are caught in a dilemma, uncertain whether there will be a short-term upward movement or a long-term bearish outcome.
This Friday, crude oil continues to circle the $70.00 mark, with the markets hesitant to fully embrace the rally witnessed earlier in the week. While the OPEC+ report provided a positive impetus for oil prices to climb, traders remain cautious regarding the 2025 projections, especially with President-elect Donald Trump set to enter the White House. There are already multiple commitments in place to boost US oil drilling and increase its status as a major exporter, despite the market already facing oversupply issues.
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 US dollar is attracting inflows once again as the interest rate differentials between the US and China, as well as Europe, widen, strengthening the greenback. As of writing, West Texas Intermediate (WTI) crude oil trades at $70.01 and Brent crude at $73.48.
Oil News and Market Movers: Trump’s Influence Looming
According to reports from Bloomberg, the Abu Dhabi National Oil Co. (Adnoc) has reduced crude allocations to some Asian customers. Bloomberg analyst Pol Lezcano reports that weak fundamentals will put pressure on oil prices in 2025 as an impending supply glut dampens the impact of war risks, sanctions, and OPEC+ cuts. Reuters reports that although the year-end rush by US oil suppliers to lower their tax bills typically leads to a December spike in crude exports, seasonally low inventories on the Gulf Coast are expected to counter this trend.
Oil Technical Analysis: Proceed with Caution
Despite the recent rally in crude oil prices, traders are being cautious about further fueling it. With the end of the year approaching and the prospect of a new US president who favors increased oil drilling, any upward movement appears to be limited. Any price increase is likely to be short-lived, as profit-taking is bound to occur before 2024 concludes.
The 55-day Simple Moving Average (SMA) at $70.06 is currently being tested. For it to become a support level, it needs to hold and see a daily close above it. Moving higher, $71.46 and the 100-day SMA at $71.12 will pose significant resistance. If oil traders can break through these levels, $75.27 will be the next crucial level.
On the downside, it’s still too early to tell if the 55-day SMA at $70.06 will be regained. The $67.12 level, which supported prices in May and June 2023, remains the nearest solid support for now. In case this breaks, the 2024 year-to-date low of $64.75 will come into play, followed by $64.38, the low from 2023.
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