Crude oil price rallied to a 12-week high on Monday amid renewed hopes over the commodity’s demand in the new year. While it has since pulled back, Brent futures have been in the green in four out of the past five sessions. This may mark a fresh start after the bearish trend that defined the crude oil market in 2024.
In support of this positive market sentiment, crude oil price daily chart bears a positive outlook. Brent oil has formed a bullish golden cross with the short-term 20-day EMA crossing the medium-term 50-day EMA to the upside.
Besides, after hitting a three-year low in September last year, the asset found support around $70.90 as it remained range-bound for about two months. In the short term, the market sentiment and US dollar will be key drivers of crude oil prices. However, weak Chinese demand and ample supply from non-OPEC countries is expected to curb gains.
Oil prices find support in US dollar’s pullback
Q4’24 saw the dollar index rally by close to 10% to a fresh two-year high on 2025’s first trading session. During those three months, a stronger greenback has weighed on crude oil prices by making the asset more expensive for buyers holding foreign currencies.
Notably, the US dollar remains on an uptrend with the dollar index holding steady above the crucial resistance-turn-support zone of $106.52. However, it has pulled back from the 2-year high it hit last week at $109.56 to $108.16 as at the time of writing. The currency’s easing has bolstered crude oil prices which tend to move inversely to the strength of the US dollar.
In addition to the profit-taking mood, reports on Trump limiting tariffs have contributed to the pullback. There are increasing bets that the incumbent president’s tariff plans won’t be as aggressive and inflationary as initially feared. More specifically, he appears to be exploring an approach that will target specific imports as opposed to blanket tariffs, which explains the easing of the greenback.
Nonetheless, the bulls remain at play ahead of the US jobs data on Friday. With the Fed’s decisions in past months being largely driven by the released data, stronger-than-expected growth in the US labor market may add fuel to the central bank’s hawkish position. This would in turn boost the US dollar while weighing on crude oil prices.
Chinese stimulus fuels crude oil demand optimism
PBoC’s surprise stimulus package in September 2024 helped boost crude oil prices although subsequent briefings were rather disappointing. As the new year takes shape, investors will be keen on the policy measures enacted by the Chinese government to improve the market sentiment and boost economic growth.
In his new year address, President Xi Jinping acknowledged the external challenges facing the Chinese economy while affirming that the country would triumph through hard work. As it strives to hit its 5% growth target, the government is expected to increase spending and boost consumption. As the second largest consumer and leading importer of crude oil globally, such aggressive measures will bolster the asset’s prices.
Crude oil price forecast
The weekly chart shows that the crude oil price has remained in a tight range in the past few months. It has remained between the support at $70 and the resistance at $80. Oil has formed a symmetrical triangle pattern, and moved slightly below the 50-week moving average.
It has also moved below the 50-week moving average. This performance is a sign that the price of crude oil has moved into the accumulation phase of the Wyckoff Method. Therefore, there is a likelihood that the price will have a strong bullish breakout in the coming months. The key level to watch will be at $85.
The post Crude oil price forecast: weekly chart points to big moves ahead appeared first on Invezz
