Oil Prices Edge Higher Amid Fiscal Stimulus Hopes and Falling U.S. Inventories

Oil prices experienced a modest uptick on Thursday, supported by optimism surrounding China’s fiscal stimulus plans and expectations of a decline in U.S. crude inventories.

The global oil market, while quiet due to the holiday season, has found support from several key factors that could influence prices into the new year.

China’s Fiscal Stimulus to Boost Demand

China, the world’s largest oil importer, is ramping up its fiscal support to revive its sluggish economy. The country plans to increase pensions, boost medical insurance subsidies, and introduce trade-in programs for consumer goods, all part of an effort to stimulate consumption.

This is backed by a record fiscal stimulus package, which includes the issuance of 3 trillion yuan ($411 billion) in special treasury bonds for 2025. According to Priyanka Sachdeva, senior market analyst at Phillip Nova, these efforts are expected to boost domestic demand for oil, supporting prices.

U.S. Crude Inventory Decline Supports Oil Prices

Adding to the bullish sentiment, U.S. crude inventories are expected to have fallen by 1.9 million barrels in the week ending December 20. This reduction in stockpiles signals healthy demand for oil, a key driver for prices.

A Reuters poll showed that gasoline and distillate inventories also experienced a decrease, indicating broad strength in the energy sector. Market observers, including commodity analysts from Rakuten Securities, are hopeful that the trend will continue, further pushing oil prices higher.

Libyan Production and Geopolitical Risks

The geopolitical landscape is also contributing to the oil market’s stability. Libya’s National Oil Corporation (NOC) reported that its average crude production for 2024 surpassed its target of 1.4 million barrels per day. While this has somewhat alleviated concerns about global supply shortages, ongoing geopolitical risks, especially in the Middle East, remain an important factor influencing oil price fluctuations.

WTI Crude Oil Technical Outlook

WTI Crude Oil is currently trading at $70.19, showing slight downward pressure after a recent rally. The price is testing the immediate resistance at $70.75, and a breakout above this level could push the price towards $71.37.

Crude Oil Price Chart - Source: Tradingview

The Relative Strength Index (RSI) stands at 61.49, indicating a moderate bullish momentum but without showing signs of being overbought. The 50-day Exponential Moving Average (EMA) at $69.66 is providing support, affirming the bullish bias in the short term.

Key Insights:

  • WTI Crude Oil remains bullish, testing resistance at $70.75.

  • RSI at 61.49 signals positive momentum, but room for upside remains.

  • The 50-day EMA at $69.66 provides support, confirming the upward trend.

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ABOUT THE AUTHOR See More
Arslan Butt
Index & Commodity Analyst
Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics.His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker.His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.
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