- Oil prices rose due to declining US stockpiles and renewed Chinese optimism after President Xi Jinping pledged to promote growth.
- Mixed results from Chinese manufacturing data may indicate that government stimulus programs are starting to work.
- A Reuters poll predicts oil prices will remain around $70 a barrel in 2025.
- From a technical perspective, price action suggests a breakout may be imminent.
Most Read: Gold (XAU/USD) Price Analysis: Will Prices Continue to Soar in 2025?
Oil prices have been on a march higher this week thanks to declining US stockpiles and renewed Chinese optimism. The first trading day of the new year began with an optimistic eye on China’s economy and fuel demand after a pledge by President Xi Jinping to promote growth.
Has Chinese Data Turned the Corner?
China’s factory activity increased in December, according to a Caixin/S&P Global survey on Thursday, but it grew more slowly than expected due to worries about the impact of tariffs proposed by U.S. President-elect Donald Trump on trade.
This follows the NBS manufacturing and non-manufacturing data released on Tuesday. The NBS data was mixed with non-manufacturing PMI data coming in better than expected while the manufacturing data dropped from November but remains above the key 50 level. Market participants may be seeing this as a sign that Government stimulus programs announced at the back end of 2024 may be starting to pay dividends.
Some analysts believe that weaker Chinese data might actually boost oil prices, as it could lead Beijing to speed up its stimulus efforts.
At present developments around China may be crucial to oil prices moving forward and worth keeping an eye on.
Reuters Poll & Other Notable News
Oil prices are expected to stay around $70 a barrel in 2025, marking the third year of decline after dropping 3% in 2024. This is due to weak demand from China and increasing global supplies, which are counteracting OPEC+’s attempts to support the market, according to a Reuters poll.
As we have said above, demand and the stimulus question around China will be central to Oil prices in 2025.
US data on Friday may provide further insight to the performance of the US economy as markets brace for a Trump Presidency. OPEC+ will be watching closely as rumors of slashing regulations and increasing Oil output from the US could also be crucial factors moving forward.
For all market-moving economic releases and events, see the MarketPulse Economic Calendar.
Technical Analysis
From a technical perspective, Oil prices are eyeing a break above a key level of confluence. The level around 76.35 has kept gains at bay since price broke below this level on October 14, 2024.
Looking at price action and the rangebound nature we have seen over the past 3 months, it points to an imminent breakout.
Usually the longer a instrument remains in a tight range and price toils, it precedes a breakout.
A break above the the 76.35 handle could bring the 200-day MA into focus at 79.66. However before that we do have some resistance resting at 78.97.
A rejection of 76.35 may retest support at the 100-day MA resting at 74.68 before the 72.38 handle comes into focus.
Brent Crude Oil Daily Chart, January 2, 2024
Source: TradingView (click to enlarge)
Support
- 74.68
- 72.38
- 70.00 (psychological level)
Resistance
- 76.35
- 78.97
- 79.66
Follow Zain on Twitter/X for Additional Market News and Insights @zvawda
Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.
Zain Vawda
He has spent the last 3 years in an analyst role honing his skills across various financial domains, including technical analysis, economic data interpretation, price action strategies, and analyzing the geopolitical impacts on global markets. Currently, Zain is advancing in obtaining his Capital Markets & Security Analyst (CMSA) designation through the Corporate Finance Institute (CFI), where he has completed modules in fixed income fundamentals, portfolio management fundamentals, equity market fundamentals, introduction to capital markets, and derivative fundamentals.
He is also a regular guest on radio and television programs in South Africa, providing insight into global markets and the economy. Additionally, he has contributed to the development of a financial markets course approved by BankSeta (Banking Sector Education and Training Authority) at NQF level 6 in South Africa.
