Oil News: Crude Prices Climb on U.S. Stock Draw and China Demand Outlook

Oil Prices Rise Over 1% on U.S. Crude Stock Draw and China Growth Optimism

Oil prices gained over 1% on Friday, driven by a larger-than-expected draw in U.S. crude inventories and optimism about Chinese economic growth. Crude futures ended the week higher, supported by low trading volumes ahead of the year-end break.

Inventory Draw Surpasses Expectations

U.S. crude inventories fell by 4.2 million barrels for the week ending December 20, surpassing the forecasted 1.9 million-barrel draw and exceeding the American Petroleum Institute’s estimate of 3.2 million barrels. Increased refinery activity and stronger fuel demand during the holiday season contributed to the decline, according to the Energy Information Administration (EIA).

As a result, Brent crude futures rose 91 cents to $74.17 per barrel, while West Texas Intermediate (WTI) crude climbed 98 cents, closing at $70.60 per barrel, up 1.41% on the day. Both benchmarks advanced approximately 1.4% for the week.

China’s Economic Outlook Lifts Demand Prospects

Crude prices also drew support from China’s improving economic outlook. The World Bank raised its growth projections for China in 2024 and 2025, reinforcing expectations of stronger oil demand from the world’s top importer. Additionally, Beijing announced plans to issue 3 trillion yuan ($411 billion) in treasury bonds next year, signaling fiscal intervention to boost economic activity.

Chart Analysis – Resistance and Support Levels

WTI crude is trading near $70.60 after breaking above the 50-day Simple Moving Average (SMA) at $69.12. Immediate resistance is seen at $71.10, with further upside targeting the 200-day SMA at $72.42. A breakout above $72.42 could push prices toward $74.00 and beyond.

On the downside, support is established at $68.69. A breach at this level could see prices drop to $66.11, marking the December low. If buyers maintain momentum above $70.60, crude may retest $71.09 and approach $72.36 in the near term.

Geopolitical Risks Reemerge

Geopolitical tensions in Eastern Europe and the Middle East are adding uncertainty to the oil market. NATO announced increased naval presence in the Baltic Sea following Finland’s seizure of a Russian oil tanker suspected of damaging infrastructure. European gas prices also climbed as concerns grow over future gas transit through Ukraine.

In the Middle East, Israeli military action in Gaza and strikes on Houthi targets in Yemen have heightened tensions. However, analysts believe the main risk to oil prices stems from potential sanctions under the incoming U.S. administration.

Market Forecast

Crude oil prices are at a critical level, with $70.60 acting as a pivot point. A move above this threshold could lead to a retest of $71.10 and $72.42, with further resistance near $74.00. On the downside, support at $69.12 and $68.69 could limit losses. A break below $68.69 would expose $66.11.

While U.S. inventory draws and stronger Chinese demand provide bullish momentum, geopolitical risks and sanctions loom over the market, keeping the outlook cautiously balanced. Traders will watch the $70.60-$71.10 range closely to gauge near-term direction.

More Information in our Economic Calendar.