Oil News: Weak China Demand, Strong Dollar Push Crude Oil Below $69.21 Support

Light Crude Oil Futures Decline on Weak China Demand and Rising U.S. Dollar

Light crude oil futures fell sharply on Monday, slipping below the 50-day moving average of $69.86 and testing crucial Fibonacci support at $69.21. A sustained break below this level could open further downside toward the October 29 low of $66.72. If prices hold $69.21 and recover above the 50-day moving average, it may signal a “buy the dip” trend, with the first upside target at $71.63.

At 11:48 GMT, Light Crude Oil Futures are trading $69.08, down $1.30 or -1.85%.

China’s Stimulus Fails to Support Oil Demand

The oil market continues to react to weak demand indicators from China, where recent stimulus measures have done little to inspire investor confidence in a meaningful recovery. October data revealed the slowest consumer price growth in four months, alongside deeper deflation in producer prices—a sign of lagging industrial demand. Market analyst Achilleas Georgolopoulos at XM highlighted that “Chinese economic momentum remains negative,” feeding deflation fears. Tamas Varga at oil broker PVM cautioned that China’s support measures may not drive significant gains in oil demand or imports in the near term.

U.S. Dollar Strength Adds to Bearish Pressure

A stronger U.S. dollar, which rose 0.40% on Monday, further weighed on oil prices. Traders are preparing for upcoming U.S. inflation data and comments from Federal Reserve Chair Jerome Powell, both of which could shape Fed policy expectations. A stronger dollar makes dollar-denominated commodities like oil more expensive for global buyers, potentially reducing demand. If inflation data supports more Fed tightening, the dollar could strengthen further, adding additional pressure on crude prices.

Decreased Gulf Disruption Concerns, Possible U.S. Supply Growth

In the Gulf of Mexico, concerns over oil production disruptions eased as storm Rafael’s impact on output appears limited. Although around 25% of Gulf oil production and 16% of natural gas output remained offline on Sunday, the risk of extended disruption is diminishing. Analysts are also monitoring the potential for U.S. supply increases under the Trump administration, although significant shifts in the 2025 production forecast are not expected at this time. Evans Energy analyst Tim Evans noted that U.S. producers may proceed cautiously given OPEC+ plans to gradually increase production in 2025.

Saudi Exports to China Fall on Weak Demand

Saudi Arabia’s crude oil exports to China are projected to decline to 36.5 million barrels in December, marking the second consecutive month of lower shipments, down from October’s 46 million barrels. Trade sources indicate that Chinese refiners, including major buyers Sinopec and PetroChina, will cut imports due to weak refining margins and lower fuel demand. In response, Saudi Aramco has lowered official selling prices for all crude grades destined for Asia, indicating a tepid demand outlook.

Market Forecast: Bearish with Downside Risks

With light crude oil prices below the 50-day moving average and testing $69.21 support, the short-term outlook remains bearish. A break below this support could accelerate selling pressure, targeting $66.72. Should prices hold above $69.21 and recover the 50-day moving average, it may signal renewed buying interest, with an initial target at $71.63. However, given strong dollar headwinds and weak Chinese demand, the downside risks remain significant.