Oil News: Futures Break 200-Day MA Resistance – Can the Rally Hold Above $72.37?

Crude Oil Prices Climb on Technical Breakout and China Growth Optimism

Light crude oil futures surged on Thursday, crossing above the 200-day moving average of $72.37, signaling a potential shift to a bullish long-term trend. This technical breakout, if sustained, could drive prices toward the October 8 peak at $77.36. However, failure to maintain this level may trigger selling pressure, pulling prices back to the 50% retracement at $71.10, and potentially as low as the 50-day moving average near $69.28.

At 11:15 GMT, Light Crude Oil futures are trading $72.76, up $1.04 or +1.45%.

China’s Economic Outlook Boosts Oil Market Sentiment

Oil markets drew support from renewed optimism surrounding China’s economic prospects. President Xi Jinping’s pledge to stimulate growth in 2025 has reinforced confidence in future fuel demand, despite lingering economic uncertainties. Factory activity in December, while expanding, underperformed expectations according to the Caixin/S&P Global survey. Nevertheless, strength in China’s services and construction sectors indicates that policy measures are gradually gaining traction. Analysts anticipate further stimulus from Beijing, which could bolster crude oil demand in the months ahead.

Record U.S. Oil Production and Demand

U.S. crude oil production reached a record 13.46 million barrels per day (bpd) in October, an increase of 260,000 bpd from September, according to the Energy Information Administration (EIA). Oil demand surged to 21.01 million bpd, marking the highest level since the onset of the COVID-19 pandemic. This sharp uptick in consumption, coupled with robust Gulf of Mexico output, highlights the resilience of U.S. supply chains. Despite this growth, production increases are expected to slow, with forecasts indicating a 300,000 to 400,000 bpd rise in 2024, compared to nearly 1 million bpd in 2023.

Geopolitical Risks and Technical Factors

Crude oil has broken out of its previous trading range, crossing above the 200-day moving average at $72.37, signaling a potential shift to a bullish trend. The key question now is whether the market can sustain this rally. Upside momentum points to the October 8 peak at $77.36 as the next target, but traders remain cautious as geopolitical uncertainties and economic data continue to influence sentiment.

Upcoming U.S. ISM manufacturing data and delayed EIA inventory reports are in focus, with initial forecasts indicating drawdowns in crude and distillate stockpiles. However, rising gasoline inventories may limit further price gains, keeping traders on alert for signs of either continued strength or a potential pullback.

Market Forecast: Neutral to Slightly Bullish

Crude oil prices are expected to hold a neutral to slightly bullish outlook as opposing market forces shape sentiment. While record U.S. production and rising global supply could limit further price increases, strong domestic demand and the prospect of Chinese economic stimulus offer support.

After trading for months within the $68.69 to $71.10 range, this zone will be a key support level if the upward trend is to continue. However, upcoming economic data and geopolitical events could drive short-term price volatility. Traders should stay cautious but ready to capitalize on further gains if bullish drivers strengthen.

More Information in our Economic Calendar.