Oil News: China Stimulus and U.S. Inventory Drop Lift Crude Outlook Amid Seasonal Demand

Technical Outlook and Key Price Levels

Light crude oil futures slipped on Friday but held onto weekly gains after Thursday’s surge through the 200-day moving average at $72.20, now acting as support. The market shows room to advance further, with the next major upside target at $77.36.

After consolidating for several months within the $71.10 to $68.69 retracement zone, crude broke out earlier this week. This area now serves as a critical support level. A drop back into the zone could neutralize upward momentum and reintroduce rangebound conditions. Sustained trade above $72.20 indicates the presence of new buyers, reinforcing the potential for higher prices.

At 10:20 GMT, Light Crude Oil futures are trading $72.75, down $0.38 or -0.52%.

China’s Economic Stimulus and Oil Demand

Expectations for economic stimulus in China remain a significant driver for oil markets. In response to economic headwinds, Beijing raised government worker wages, injecting up to $20 billion into the economy. This move signals broader efforts to support domestic consumption and drive demand for oil. Analysts anticipate further policy measures aimed at stabilizing growth in the world’s top oil importer, which could provide ongoing support to crude prices.

StoneX analyst Alex Hodes highlighted China’s pivotal role in shaping global oil demand, emphasizing that policy actions through 2025 will heavily influence market sentiment.

U.S. Economic Conditions and Inventory Data

In the U.S., crude inventories fell by 1.2 million barrels to 415.6 million last week, missing expectations of a 2.8 million barrel draw. Refineries ramped up output, boosting gasoline and distillate inventories, but overall fuel demand dipped to a two-year low.

Despite the inventory miss, traders remain focused on potential interest rate cuts by the Federal Reserve. Lower rates are expected to stimulate economic activity and fuel oil demand by reducing borrowing costs and encouraging consumption.

Weather and Seasonal Demand Factors

Weather forecasts pointing to colder conditions in the U.S. and Europe could further support demand for heating oil and diesel in the coming weeks. Seasonal factors, coupled with refinery activity, may provide additional price support as winter progresses.

Market Forecast

Crude oil prices are poised for further gains, with bullish sentiment underpinned by expectations of economic support in both China and the U.S. The 200-day moving average at $72.20 serves as a key technical floor, while the next upside target sits at $77.36.

A sustained move above current levels signals room for continued growth, though failure to hold $71.10 could see the market revert to sideways trading. The overall outlook leans bullish, with demand drivers extending into the early part of the year.

More Information in our Economic Calendar.