Crude Oil prices are trading higher by nearly 1% on Tuesday as traders gear up for the Christmas holidays. Instead of focusing solely on the upcoming release of the American Petroleum Institute (API) data, they’re reacting to various market developments.
Impact of China’s Stimulus
Markets are taking notice of headlines about further stimulus in China, a major global consumer of oil. Chinese policymakers plan to inject 3 trillion Yuan worth of bonds in 2025. This move aims to boost the economy by supporting consumption subsidies, business equipment upgrades, and investments in key technology and advanced manufacturing sectors. Such an injection is expected to ramp up spending and consequently increase the demand for oil, thus driving its price higher in the US trading session.
US Dollar Index and Market Volatility
DXY’s Position
The US Dollar Index (DXY), which measures the performance of the US Dollar (USD) against a basket of currencies, is currently residing just below its two-year high. As the trading hours wind down before Christmas, the volatility of the US Dollar is decreasing. However, there’s still a possibility that it could hit a fresh two-year high before the end of the year.
Current Oil Prices
WTI and Brent Crude Levels
At the time of writing, Crude Oil (WTI) is trading at $69.95 and Brent Crude at $72.85.
Oil Market News and Movers
China’s Bond Sale Plan
As mentioned earlier, policymakers in China are planning to sell a record 3 trillion Yuan ($411 billion) of special treasury bonds in 2025 to support different aspects of the economy, which is expected to have a positive impact on oil demand.
India’s Oil Refiners’ Difficulty
India’s state Oil refiners are having trouble buying the volume of Russian crude they need, according to sources familiar with the matter.
US Permian Basin Methane Emissions
In the US, methane emissions in the Permian Oil basin plunged 26% last year. This was due to companies tightening their operations and deploying new technology to stop leaks of the potent greenhouse gas, as reported by S&P Global Commodity Insights.
API Release
Later, at 21:30 GMT, the American Petroleum Institute (API) will release its weekly Crude Stockpile Change number. The previous week saw a drawdown of 4.7 million barrels.
Oil Technical Analysis
Resistance Levels
Despite the news of China’s planned stimulus, Crude Oil prices aren’t making a huge jump. The details of the stimulus plan still need to be further outlined, and with many market participants not trading on Tuesday, a significant price move is unlikely. Looking ahead, the 100-day Simple Moving Average (SMA) at $70.76 and $71.46 (February 5 low) act as firm resistance levels nearby. If more factors emerge to support oil prices, the next important level will be $75.27 (January 12 high). However, traders should watch out for quick profit-taking as the year-end approaches.
Support Levels
On the downside, $67.12 – a level that held the price in May and June 2023 and during the last quarter of 2024 – is the first solid support nearby. In case this level breaks, the 2024 year-to-date low of $64.75 emerges, followed by $64.38, which was the low from 2023.
In conclusion, the crude oil market is experiencing a combination of factors influencing its price as the Christmas holidays approach. While the potential for increased demand from China’s stimulus offers an upside, various technical levels and other market developments, along with the impending API release, will continue to shape its near-term movements. Traders will be closely watching these elements to gauge where oil prices might head next.
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