Oil prices were headed for a weekly gain on Friday as optimism over demand recovery from China aided sentiments.
Meanwhile, a drop in US crude oil inventories also boosted prices on Friday.
“Geopolitical tensions also added uncertainty, keeping natural gas and oil markets volatile,” Arslan Ali, derivatives analyst at FXempire, said in a report.
However, a stronger US dollar, which has risen 7% this quarter, capped further gains, making oil more expensive for non-dollar buyers.
At the time of writing, the price of West Texas Intermediate crude oil on the New York Mercantile Exchange was at $69.96 per barrel, up 0.5%.
Brent crude oil on the Intercontinental Exchange was at $73.11 per barrel, up 0.4% from the previous close.
Both crude benchmarks were on course for small gains this week.
China optimism
Optimism over recovering oil demand from China boosted the market on Friday as the World Bank raised its forecast for economic growth in the Asian country for 2024 and 2025.
However, the bank also said that subdued household and business confidence would continue to weigh on economic activities next year.
Authorities in China are likely to issue special treasury bonds, which would amount to $3 trillion yuan or $411 billion in 2025, Reuters reported earlier this week.
China has been struggling with its economy over the past year as a property crisis and weakening industrial activity weighed on demand for commodities.
Oil imports have steadily declined throughout the year, pointing to a plateauing of demand growth in the world’s biggest importer of crude.
Moreover, experts have forecast that China’s oil demand is likely to peak in the coming years.
Vortexa’s analyst, Emma Li told Invezz last month that gasoline demand in China may peak as early as next year.
Investors will continue to monitor the economic environment in China in the coming weeks for further cues.
Inventories
According to the American Petroleum Institute, crude oil inventories in the US declined by 3.2 million barrels last week.
Analysts expected inventories to decline by just 700,000 barrels in the week ended December 20.
Investors will now wait for the release of the official data from the US Energy Information Administration later on Friday.
The release of the data was delayed from Wednesday on account of the Christmas holidays.
The decline in the inventories comes as a relief for oil bulls as production has steadily risen in the US this year.
The EIA expects oil production to average 13.52 million barrels per day next year in the US, a new record high.
The International Energy Agency has also said that oil supply from countries outside of the Organization of the Petroleum Exporting Countries and allies would drive growth in 2025.
The US would be at the forefront of supply growth next year, according to the Paris-based agency.
Technical analysis
Trading volumes remained low on Friday at the fag end of 2024. Volumes are also expected to be low on the last two days of trading next week.
The WTI price held near $70 per barrel as it broke above the $69.75 50-day exponential moving average.
“A sustained move above $69.54 could push oil toward resistance levels at $70.50 and $71.37, signaling renewed bullish momentum,” Ali said.
Support for prices remains at $68.77 per barrel, followed by $67.88 a barrel.
Chart by FXempire.
For Brent crude oil, the immediate resistance is at $73.81 per barrel, followed by $74.54.
Ali noted:
Traders should watch $73 as the key level to gauge the next trend.
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