Oil News: Crude Faces Bearish Pressure with 200-Day Average in Sight

Crude Oil News: Oil Prices Edge Lower as Demand Concerns Offset Supply Tightness

Light crude oil futures traded flat on Tuesday, with prices hovering near the previous session’s lower close. Monday’s selloff saw prices retreat from a peak of $74.99, the highest since October 10, before closing 0.54% lower.

If selling pressure continues, traders are watching the 200-day moving average at $72.35 for potential support. A breach of this level could trigger further downside, with $71.10 emerging as the next key target. Conversely, a breakout above $74.99 may signal bullish momentum, with $77.36 in sight.

At 10:43 GMT, Light crude oil futures are trading $73.71, up $0.15 or +0.20%.

Demand Optimism Fades as Supply Tightness Provides Limited Support

Oil prices dipped on Tuesday as traders reassessed demand prospects following last week’s rally. Benchmark prices retreated after climbing for five consecutive sessions, driven by hopes of Chinese economic stimulus. However, weaker global economic data, including softer U.S. factory orders and rising inflation in Germany, weighed on market sentiment. Analysts highlighted that concerns over slower Eurozone rate cuts and falling U.S. manufactured goods orders contributed to the pullback.

Despite the bearish demand outlook, tightening supply from Russia and Iran due to expanding Western sanctions provided some price stability. Cold weather across the U.S. and Europe further buoyed heating oil demand, offering near-term price support. Meteorologists forecast colder-than-average conditions across the Lower 48 states through January 21, boosting consumption.

US Factory Orders Slide, Weighing on Broader Economic Sentiment

Adding to market uncertainty, U.S. factory orders fell 0.4% in November, reflecting weaker demand for commercial aircraft. This decline followed a revised 0.5% gain in October. Analysts had anticipated a smaller 0.3% drop. The broader manufacturing sector continues to feel the effects of restrictive monetary policy.

Orders for non-defense capital goods excluding aircraft, a key indicator of business investment, rose 0.4% but were revised down from the initial 0.7% estimate. This signals slowing business spending toward the end of the year.

Saudi Arabia Raises February Oil Prices to Asia

In response to tightening supply and robust Asian demand, Saudi Aramco increased its February crude prices to Asia. The price of Arab Light crude rose by 60 cents to $1.50 per barrel above the Oman/Dubai average, exceeding market forecasts. Prices for northwest Europe and the Mediterranean also rose by $1.30 per barrel across all grades.

The unexpected hike reflects rising spot premiums driven by reduced Iranian and Russian shipments, which tightened the Middle Eastern market. As sanctions on Russia expand, traders expect further supply constraints, reinforcing Middle East crude’s appeal to Asian refiners.

Market Forecast: Neutral to Bearish Outlook with Focus on Support Levels

Oil markets remain at a critical juncture, with bearish demand signals balancing against supply-side constraints. The focus in the near term will be on whether crude can hold the 200-day moving average at $72.35. A decisive break below this level may accelerate losses towards $71.10, while upside potential hinges on clearing resistance at $74.99. Traders are closely monitoring U.S. economic data and geopolitical developments for signals that could shift market sentiment in the coming weeks.

More Information in our Economic Calendar.