Oil News: Futures Up 1% This Week on China Stimulus and Inventory Draws

Crude Oil Edges Higher on Stimulus Hopes and Inventory Draws

Light crude oil futures are trading slightly higher Friday, maintaining a narrow range for the third consecutive session. The market is holding above key technical support, reflecting cautious optimism driven by Chinese stimulus expectations and declining U.S. inventories.

At 11:47 GMT, Light crude oil futures are trading $70.22, up $0.60 or +0.86%.

Technical Levels and Resistance Factors

Light crude futures are holding within a tight range, with 50% resistance at $71.10 acting as a potential trigger for upward acceleration. A break above this level could open the door to the 200-day moving average at $72.41, a key marker for long-term direction. On the downside, initial support is found at the 50-day moving average of $69.11, which defines the intermediate trend. A move below this level could target the 61.8% retracement at $68.69, a critical point that may lead to further downside momentum if breached.

Weekly Gains Fueled by China and U.S. Inventory Data

WTI crude is poised for a 1% weekly gain, supported by growing optimism surrounding Chinese economic recovery and forecasts of lower U.S. crude inventories. Prices climbed nearly 1% early Friday as traders reacted to reports indicating that U.S. crude stocks likely fell by 1.9 to 3.2 million barrels last week. The anticipated crude draw suggests tightening supply conditions, providing upward pressure on prices.

Expectations for increased oil demand were further boosted by cold weather patterns in the U.S., which could lift consumption. However, traders await the U.S. Energy Information Administration’s (EIA) official inventory report, delayed to 1800 GMT due to the holiday schedule.

China’s Stimulus Efforts Drive Demand Optimism

China’s economic stimulus measures continue to underpin crude market sentiment. The World Bank revised its growth outlook for China for 2024 and 2025, projecting stronger-than-expected expansion. Additionally, Chinese authorities plan to issue 3 trillion yuan ($411 billion) in special treasury bonds next year, signaling Beijing’s aggressive push to revive economic momentum. These measures enhance the outlook for increased Chinese oil imports, the world’s largest, adding support to global crude markets.

Dollar Strength Caps Further Gains

Despite bullish factors, the strengthening U.S. dollar remains a headwind for oil prices. The greenback’s rise, driven by expectations of growth-boosting policies under the incoming U.S. administration, has limited upside potential by making oil more expensive for international buyers. This factor continues to restrain speculative buying, preventing crude from breaking decisively higher.

Market Forecast

Crude oil’s near-term outlook leans bullish, with support driven by Chinese stimulus measures and anticipated U.S. inventory draws. However, upside momentum hinges on a sustained break above $71.10, with the 200-day moving average at $72.41 as the next target. Conversely, failure to hold above $69.11 could trigger selling pressure, pulling prices toward the $68.69 support zone. Traders should watch for volatility around the release of the EIA report, which could provide the next directional cue.

More Information in our Economic Calendar.