Oil News: China Data and Fed Caution Keep Crude Under Pressure

Oil Prices Slip as Demand Concerns and Fed Meeting Weigh on Sentiment

Light crude oil futures are trending lower on Tuesday, edging closer to the critical 50-day moving average at $69.46 during a two-day decline. A move below this level could amplify selling pressure, with the next support target at the Fibonacci level of $68.69. On the upside, resistance sits at the 50% retracement level of $71.10, followed by the 200-day moving average at $72.48.

Weak Chinese Data Sparks Demand Concerns

Oil prices are under pressure as renewed concerns about Chinese demand weigh on market sentiment. Weakness in Chinese consumer spending data, despite strength in industrial production, has raised questions about the robustness of the world’s second-largest economy.

Market analysts, including IG’s Tony Sycamore, attributed the pullback to profit-taking and concerns over China’s economic trajectory. Monday’s data dampened optimism, causing oil to retreat from recent multi-week highs.

Traders Await U.S. Fed Policy Decision

Investors are also exercising caution ahead of the U.S. Federal Reserve’s final policy meeting of the year, scheduled for Tuesday and Wednesday. The market has already priced in a 25 basis-point interest rate cut, but attention will focus on the Fed’s forward guidance regarding rate policy for 2025 and 2026. Any deviations or surprises from the Fed’s anticipated stance could trigger significant volatility in the oil market.

Lower interest rates typically stimulate economic growth, boosting oil demand. However, concerns remain that higher inflation expectations under the incoming U.S. administration could lead the Fed to adopt a more conservative approach to easing monetary policy.

Supply Overhang Looms Despite OPEC+ Efforts

The oil market also faces headwinds from rising non-OPEC+ supply, particularly from the U.S. and Brazil, which may offset the group’s production cuts. The International Energy Agency (IEA) reported last week that global markets could see a supply surplus of 950,000 barrels per day in 2024, equivalent to nearly 1% of global supply. This outlook adds to bearish pressures, particularly as demand remains uncertain.

EU Sanctions on Russia Unlikely to Disrupt Flows

Meanwhile, geopolitical developments around Russia’s shadow fleet of oil tankers have introduced further complexity. The European Union announced its 15th sanctions package against Russia, targeting unregulated vessels and Chinese entities facilitating Moscow’s oil exports. However, analysts expect minimal disruption to Russian oil flows, as the majority of shipments have already moved outside Western insurance and regulatory frameworks.

Market Forecast: Bearish Outlook

Oil prices are likely to remain under pressure in the short term, with demand concerns and rising supply from non-OPEC+ producers weighing on sentiment. Traders will closely monitor the outcome of the Fed meeting for any surprises that could shift expectations on economic growth and oil demand. A bearish outlook prevails as WTI crude risks breaking below $69.46, potentially testing support near $68.69.

More Information in our Economic Calendar.