- Oil prices are recovering from earlier losses as concerns about China ease during the US trading session.
- Traders have reduced their oil exposure ahead of year-end, while Chinese retail sales growth came in significantly below expectations.
- The US Dollar Index hovers around 107.00 as traders rebalance positions ahead of the Federal Reserve’s interest rate meeting.
Crude oil is bouncing off key support around $70.00, heading back toward $71.00 after earlier selling pressure triggered by disappointing Chinese retail sales data for November, which dampened expectations for a quick regional recovery. The 3% growth in retail sales was well below expectations, and the outlook remains weak, as tanker rates on major routes to China have fallen to their lowest levels this year, signaling further sluggish demand.
The US Dollar Index (DXY), which measures the dollar’s performance against a basket of currencies, is softer on Monday, aided by a recovery in the Euro. Germany’s preliminary Services Purchasing Managers Index (PMI) for December rose to 51, indicating growth after previously contracting. Meanwhile, political instability is brewing in Germany, with snap elections scheduled for February 23, 2025.
At the time of writing, Crude Oil (WTI) is trading at $70.56, while Brent Crude stands at $73.89.
Oil News and Market Movers: Trump Fails to Boost Oil Supply
- Shipping rates for crude on the largest vessels from the Middle East to China, a key benchmark route, have dropped by a third this year, as slowing demand in the top importer and OPEC+ delays in restarting idled supply weigh on the market, according to Bloomberg.
- The International Energy Agency (IEA) forecasts that the global oil market will remain well-supplied in 2025, despite OPEC’s ongoing production cuts and modest growth in demand projections, Reuters reports.
- China’s crude oil imports show signs of a rebound, though storage data suggests a rise in inventory levels, according to Reuters.
- US sanctions on tankers have disrupted Iranian crude exports to China, squeezing the flows to OPEC’s most important customer, Bloomberg reports.
Oil Technical Analysis: Technical Bounce for Now
Crude oil prices are pulling back after a more than 5% rally, triggered by weaker-than-expected Chinese retail data. This raises doubts about the 2025 outlook, where China’s economic revival is crucial for boosting global oil consumption. If President-elect Donald Trump proceeds with additional tariffs, Chinese oil demand could suffer further in 2025.
On the upside, resistance is firm at $71.46, with the 100-day Simple Moving Average (SMA) at $71.08 also acting as a key hurdle. Some selling pressure was seen ahead of this level on Friday. If oil breaks through, $75.27 could be the next significant resistance.
On the downside, it remains uncertain whether the 55-day SMA at $70.11 will hold. If not, the next solid support is at $67.12, which held in May and June 2023. A break below this could lead to a test of the 2024 year-to-date low at $64.75, followed by the 2023 low at $64.38.
