Oil prices climbed on Tuesday, reversing losses from the prior session, as traders reacted to a mildly optimistic market outlook for the near term. The gains come despite subdued activity ahead of the Christmas holiday and mixed economic data from key global markets.
Market Performance
- Brent crude futures rose 82 cents (1.1%) to $73.45 per barrel.
- West Texas Intermediate (WTI) crude increased 76 cents (1.1%), reaching $70 per barrel.
Analysts Predict Stability Amid Holiday Lull
According to analysts at FGE, crude prices are expected to remain relatively stable in the short term due to reduced market activity during the holiday season.
“Activity in the paper markets decreases during this period, with many participants staying on the sidelines until clearer signals emerge about 2024 and 2025 global oil balances,” FGE noted.
The group also highlighted that changes in supply and demand in December have supported their “less-bearish” outlook.
“Given the current short positioning in the paper market, any supply disruption could trigger sharp upward spikes in prices,” they added.
Demand Outlook Improves
Market sentiment has also been bolstered by expectations of stronger oil demand in the coming months.
- Neil Crosby, Assistant Vice President of Oil Analytics at Sparta Commodities, pointed to a shift in the EIA’s Short-Term Energy Outlook (STEO), which now predicts a draw in global oil balances for 2025.”The consensus over long-term 2025 liquids balances is beginning to fracture,” Crosby noted.
- China’s plans to inject 3 trillion yuan ($411 billion) into its economy through special treasury bonds next year are also seen as a positive signal for oil markets. The move is part of Beijing’s broader fiscal stimulus aimed at reviving economic growth, further supporting crude demand.
WTI Support Levels and U.S. Economic Signals
Kelvin Wong, Senior Market Analyst at OANDA, identified $67 per barrel as a near-term support level for WTI crude, citing China’s fiscal measures and ongoing market dynamics.
The U.S. economy, the largest oil consumer globally, also showed mixed signals overnight:
- Consumer confidence dipped in December.
- Capital goods orders surged in November, driven by robust demand for machinery.
- New home sales rebounded, indicating resilience in the housing market.
Key Takeaways
Despite the holiday slowdown in trading, oil markets are showing signs of cautious optimism. Analysts are closely monitoring evolving supply-demand dynamics, geopolitical factors, and fiscal policies in major economies like China and the U.S., which are likely to shape crude prices in the months ahead.
Looking into 2024 and beyond, any significant supply disruptions or unexpected economic developments could lead to volatility in global oil markets.
