Light crude oil futures edged higher on Friday, signaling a potential fourth consecutive week of gains as traders balanced bullish supply risks against demand-side uncertainties.
Prices lingered near technical resistance levels at $78.28, $79.44, and $80.00, raising the possibility of a short-term correction should momentum falter. Key support lies at $76.03 and $75.47, with traders eyeing these levels for dip-buying opportunities.
At 10:37 GMT, Light Crude Oil futures are trading $78.15, up $0.30 or +0.39%.
The Biden administration’s expanded sanctions on Russian oil producers and tankers are a significant factor underpinning recent gains. These measures, targeting 183 vessels and key Russian producers, have disrupted supply chains, reducing tanker availability and complicating shipments to major importers like China and India. Analysts from ING estimate the sanctions could eliminate up to 700,000 barrels per day (bpd) from the global market, tightening supply further.
At the same time, a sanctioned tanker was observed discharging Russian crude at a port in China’s Shandong province, where independent refiners are major buyers. Industry participants are monitoring compliance closely, as any shifts in enforcement could significantly affect market sentiment.
While seasonal demand for heating oil in the U.S. has strengthened due to colder-than-normal winter conditions, broader demand signals present a mixed picture. U.S. inflation data suggests easing price pressures, supporting the case for Federal Reserve rate cuts, which could stimulate economic activity and fuel consumption. However, China’s refining activity has declined, marking its first year-on-year drop in throughput since 2022, potentially tempering optimism for a robust demand recovery.
Geopolitical factors remain pivotal, with tensions in the Middle East easing following a Gaza ceasefire deal. The end of attacks on ships in the Red Sea could alleviate some logistical bottlenecks, but supply concerns persist due to anticipated tougher stances on Iran and Venezuela by U.S. policymakers.
Meanwhile, freight rates for sanctioned and non-sanctioned tankers have soared, reflecting tighter shipping availability. This trend has compounded bullish supply-side pressures as traders navigate increasingly expensive logistics.
Crude oil markets exhibit a cautiously bullish outlook, with prices likely to test the $79.44 and $80.00 resistance levels in the near term. A breakout could target $81.33, while a failure to maintain momentum risks a pullback to $76.03 – $75.47.
Supply constraints from sanctions, coupled with seasonal demand, provide strong bullish underpinnings. However, uncertainties around demand growth and compliance with sanctions enforcement keep the market vulnerable to profit-taking. Traders should remain agile, balancing opportunities for gains with the potential for short-term corrections.
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James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.