Oil News: Traders Eye Demand Recovery as China Stimulus and IEA Outlook Collide

Steady as Traders Weigh IEA Surplus Forecast and Chinese Demand Optimism

Light crude oil futures remained nearly flat on Thursday, holding above the 50-day moving average at $70.10, a key technical level signaling buyer defense. Market participants are closely watching resistance at $71.53, the 50% retracement level, with potential upside toward the 200-day moving average at $72.93. A break below Fibonacci support at $69.11, however, could signal a shift to bearish momentum.

At 11:34 GMT, Light Crude Oil Futures are trading $70.23, down $0.06 or -0.09%.

IEA Surplus Forecast Signals Supply Overhang

The International Energy Agency (IEA) projects a comfortably supplied oil market in 2025, even as it revised its global oil demand growth estimate for next year to 1.1 million barrels per day (bpd), up from 990,000 bpd. Despite this modest increase, the report highlights headwinds for OPEC+, whose production cuts remain in place to counter weak demand and rising non-OPEC+ supply.

The IEA forecast includes a 950,000 bpd supply surplus in 2024, rising to 1.4 million bpd if OPEC+ unwinds cuts as planned. This surplus underscores ongoing challenges, with OPEC recently delaying production hikes to April 2025 and extending cuts through 2026.

China’s Economic Stimulus Sparks Demand Hopes

Economic developments in China, the world’s second-largest oil consumer, are raising demand expectations. Recent policy announcements signal an “appropriately loose” monetary policy for 2025, the first such easing in over a decade. Additionally, Chinese crude imports rose over 14% year-on-year in November, breaking a seven-month streak of declines.

However, long-term demand growth from China faces uncertainty due to economic challenges and a shift toward electric vehicles. The IEA notes this trend contributed to a slower-than-expected rise in global oil demand this year.

US Interest Rates and Sanctions Add to Market Focus

In the US, expectations of a Federal Reserve rate cut have lifted optimism for energy demand. November’s inflation data aligned with forecasts, strengthening the case for monetary easing. Meanwhile, rising gasoline and distillate inventories indicate tepid short-term demand.

Geopolitical factors also weighed on prices. EU sanctions targeting Russia’s “shadow fleet” aim to tighten compliance with the $60 per barrel price cap on Russian crude, adding potential support for oil prices.

Market Forecast: Cautious Bullish Outlook

Traders appear poised for limited gains in the short term as bullish factors, including China’s potential demand recovery and Fed rate cut expectations, counterbalance the IEA’s surplus outlook.

With technical resistance at $71.53 in sight and support firming at $70.10, oil prices could trend higher if buyers sustain momentum. However, any breach below $69.11 could renew selling pressure, flipping the market to bearish territory.

More Information in our Economic Calendar.