Oil News: Crude Drops as Weak Chinese Spending Sparks Demand Concerns, Capped Near $71.53

Oil Prices Dip Following Weak Chinese Spending Data

Light crude oil futures are trending lower on Monday, slipping from a three-week high of $71.44 per barrel. This decline comes as traders reacted to resistance at the $71.51-$71.53, which includes a critical long-term 50% retracement level. Concerns about weak consumer spending in China, the world’s largest oil importer, added downward pressure on prices, underscoring the fragility of the global demand outlook.

At 12:32 GMT, Light Crude Oil futures are trading $70.54, down $0.75 or -1.05%.

Key Resistance and Support Levels in Focus

Monday’s retreat below $71.53 raises the likelihood of a test at the 50-day moving average around $70.00. A breach of this level could signal a bearish momentum shift, setting the stage for further declines. Conversely, should buyers manage to reclaim and hold above $71.53, a push towards the 200-day moving average at $72.91 could materialize, potentially reviving bullish sentiment.

Holding between the 50% retracement level at $71.53 and the 61.8% retracement at $69.11 may indicate the start of rangebound trading. This could reflect traders awaiting a decisive catalyst to guide the next move in oil prices.

Weak Chinese Data Pressures Global Oil Demand Outlook

Disappointing Chinese retail sales data weighed heavily on crude futures on Monday. While Chinese industrial output showed modest improvement in November, weaker consumer spending highlighted challenges facing the country’s economy. This reinforces expectations that Beijing will need to ramp up stimulus measures to sustain growth in the face of U.S. trade tariffs under the second Trump administration.

The subdued Chinese outlook has also influenced OPEC+ to maintain cautious production levels, postponing any plans for increased output until at least April 2025. Analysts at UBS noted that market participants remain focused on potential Chinese policy responses to drive economic recovery and bolster oil demand.

Profit-Taking and Fed Decision Add to Volatility

Oil traders took profits following last week’s 6% rally, driven by easing supply concerns and temporary optimism in global markets. However, with many funds closing their books for the year, reduced trading volumes have led to more volatile price movements.

The upcoming U.S. Federal Reserve decision on interest rates is another key driver. Markets widely expect the Fed to cut rates by 0.25% at its Dec. 17-18 meeting, a move that could support economic growth and oil demand heading into 2025.

Geopolitical Tensions Support Price Floor

Despite the bearish sentiment, geopolitical risks continue to offer some support to oil prices. Potential U.S. sanctions against Russia and Iran remain a key focus. U.S. Treasury Secretary Janet Yellen signaled the possibility of targeting Chinese banks and “dark fleet” tankers to curb oil revenue funding Russia’s war in Ukraine. Additionally, heightened sanctions on Iranian crude exports have already pushed prices to multi-year highs.

Market Forecast: Bearish with Rangebound Potential

In the short term, crude oil prices are likely to face bearish pressure, with a possible test of $70.00 if selling momentum persists.

However, the market may also enter a rangebound phase, holding between the 50% retracement level at $71.53 and the 61.8% retracement at $69.11, as traders await clearer catalysts.

Any surprise stimulus measures from China or a dovish Fed stance could provide upside risks, potentially propelling prices back above $71.53. Geopolitical concerns may also limit the downside, keeping traders vigilant for sudden supply disruptions.

More Information in our Economic Calendar.