Oil News: Crude Oil Outlook Bullish Amid Geopolitical Tensions, Inventory Drops

Oil Prices Hold Steady Amid Geopolitical Risks, Inventory Draws, and Inflation Concerns

Light crude oil futures saw a modest uptick on Wednesday, stabilizing after a sharp sell-off the previous day. Prices are currently hovering near the crucial 50-day moving average as traders await key U.S. economic data and the weekly Energy Information Administration (EIA) inventory report. The market’s cautious tone is driven by ongoing Middle East tensions, recent inventory data suggesting robust demand, and anticipation of the latest U.S. inflation figures.

At 10:24 GMT, Light Crude Oil Futures are trading $78.39, up $0.04 or +0.05%.

U.S. Inventory Decline Supports Oil Prices

The American Petroleum Institute (API) reported a significant drawdown in U.S. crude oil inventories, with stocks falling by 5.2 million barrels, well above the expected 2 million barrel decrease. This larger-than-anticipated decline signals strong demand and provides a bullish underpinning for oil prices. Investors now turn their attention to the EIA’s official data, which could further influence market sentiment.

CPI Data Could Influence Fed Policy and Oil Demand

Traders are closely monitoring the upcoming U.S. Consumer Price Index (CPI) report, which is expected to show a 0.2% monthly increase and a 3.2% annual rise in core inflation. The CPI data could shape Federal Reserve policy decisions, particularly regarding interest rates. If inflation remains elevated, the Fed may delay rate cuts, potentially slowing economic growth and, consequently, energy demand. Conversely, lower inflation could prompt earlier rate cuts, boosting economic activity and oil consumption.

Middle East Conflict Adds Upside Risk

Geopolitical tensions in the Middle East continue to be a major factor influencing crude oil prices. Following the killing of a Hamas leader, Iran has promised a severe response, heightening fears of a broader regional conflict. The U.S. has responded by deploying additional military assets to the region, raising concerns about potential disruptions to oil supplies. Analysts warn that any escalation could threaten key oil transit routes, putting over 20 million barrels per day at risk.

IEA Lowers Demand Forecasts Amid China Slowdown

While geopolitical risks are driving prices higher, there are counterbalancing factors. The International Energy Agency (IEA) recently revised its 2025 global oil demand growth forecast downward, citing weaker-than-expected economic performance in China, the world’s largest oil importer. The slowdown in China’s economy, particularly in its petrochemical sector, is expected to drag on global oil demand growth in the coming years.

Market Forecast: Mixed Signals

Crude oil prices are likely to remain volatile in the near term, with conflicting forces at play. On the one hand, robust demand in the U.S. and potential supply disruptions from the Middle East could support higher prices. On the other hand, weaker demand projections from China could limit gains. Traders should watch for the EIA’s inventory data, the CPI report, and any further developments in the Middle East conflict to gauge the market’s next move. Overall, the outlook remains cautiously bullish, with geopolitical risks likely to drive near-term price action.

Technical Analysis

Light crude oil futures are struggling to gain traction on Wednesday inside a key retracement zone formed by the $84.83 to $70.67. Resistance is the Fibonacci level at $79.42, support is the 50% level at $77.75.

The market is also holding steady above the 50-day moving average at $78.00, which is controlling the intermediate trend.

If buyers can resume the rally through this week’s high at $80.16, light crude oil futures could surge toward the pair of main tops at $82.33 and $83.11.

Meanwhile, a failure to hold the 50-day moving average could trigger an acceleration toward the 200-day moving average at $75.51.