As the Christmas holidays draw near, oil prices are on the rise, with a nearly 1% rally. Traders are bracing themselves not only for the festivities but also for the upcoming release of the American Petroleum Institute (API) data.
The market is reacting to headlines regarding potential further stimulus in China, a leading global oil consumer. The news of Chinese policymakers’ plan to inject 3 trillion yuan through bond sales in 2025 to boost the economy has caught the attention of traders. This injection is expected to increase spending and subsequently drive up the demand for oil.
Meanwhile, the US Dollar Index (DXY), which measures the dollar’s performance against a basket of currencies, is trading just below its current two-year high. Volatility in the dollar is subsiding in these final trading hours before Christmas, and there is still a possibility of it hitting a new two-year high before the year ends.
At the time of writing, West Texas Intermediate (WTI) crude is trading at $69.95, and Brent crude is at $72.85.
Oil News and Market Movers:
According to Reuters, Chinese policymakers are set to sell a record 3 trillion yuan ($411 billion) of special treasury bonds in 2025. The funds will be used to support consumption subsidies, business equipment upgrades, and investments in key technology and advanced manufacturing sectors. This move is anticipated to have a positive impact on oil demand in China.
Bloomberg reports that India’s state oil refiners are facing difficulties in procuring the required volume of Russian crude.
A study by S&P Global Commodity Insights reveals that methane emissions in the US Permian Oil basin dropped by 26% last year, thanks to companies tightening their operations and implementing new leak-prevention technologies.
The API is scheduled to release its weekly crude stockpile change number at 21:30 GMT. The previous week saw a drawdown of 4.7 million barrels.
Oil Technical Analysis:
Despite the news of China’s potential boost in local oil demand through a significant 3 trillion yuan injection, crude oil prices have not witnessed a substantial jump. This can be attributed to the fact that the details of the stimulus plan are yet to be fully outlined, and with many market participants absent on Tuesday, a significant price movement is unlikely.
Looking ahead, the 100-day Simple Moving Average (SMA) at $70.76 and the $71.46 level (February 5 low) pose firm resistance in the near term. If more positive factors emerge to support oil prices, the next crucial level to watch will be $75.27 (January 12 high). However, as the year-end approaches, traders should be cautious of quick profit-taking.
On the downside, the $67.12 level, which provided support in May and June 2023 and during the last quarter of 2024, remains the first solid support nearby. If this level is breached, the 2024 year-to-date low of $64.75 will come into play, followed by the 2023 low of $64.38.
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