Brent Crude: Oil Eyes Break of Key Confluence Level on Chinese Optimism

01/02/2025

2 minutes read

2025.01.02 08:34

Oil prices rose due to declining US stockpiles and renewed Chinese optimism after President Xi Jinping pledged to promote growth.
Mixed results from Chinese manufacturing data may indicate that government stimulus programs are starting to work.
From a technical perspective, price action suggests a breakout may be imminent.

prices have been on a march higher this week thanks to declining US stockpiles and renewed Chinese optimism. The first trading day of the new year began with an optimistic eye on China’s economy and fuel demand after a pledge by President Xi Jinping to promote growth.

Has Chinese Data Turned the Corner?

China’s factory activity increased in December, according to a Caixin/S&P Global survey on Thursday, but it grew more slowly than expected due to worries about the impact of tariffs proposed by U.S. President-elect Donald Trump on trade.

This follows the NBS manufacturing and non-manufacturing data released on Tuesday. The NBS data was mixed with non-manufacturing PMI data coming in better than expected while the manufacturing data dropped from November but remains above the key 50 level. Market participants may be seeing this as a sign that Government stimulus programs announced at the back end of 2024 may be starting to pay dividends.

Some analysts believe that weaker Chinese data might actually boost oil prices, as it could lead Beijing to speed up its stimulus efforts.

At present developments around China may be crucial to oil prices moving forward and worth keeping an eye on.

Reuters Poll & Other Notable News

Oil prices are expected to stay around $70 a barrel in 2025, marking the third year of decline after dropping 3% in 2024. This is due to weak demand from China and increasing global supplies, which are counteracting OPEC+’s attempts to support the market, according to a Reuters poll.

As we have said above, demand and the stimulus question around China will be central to Oil prices in 2025.

US data on Friday may provide further insight to the performance of the US economy as markets brace for a Trump Presidency.

OPEC+ will be watching closely as rumors of slashing regulations and increasing Oil output from the US could also be crucial factors moving forward. Economic Events

Technical Analysis

From a technical perspective, Oil prices are eyeing a break above a key level of confluence. The level around 76.35 has kept gains at bay since price broke below this level on October 14, 2024.

Looking at price action and the rangebound nature we have seen over the past 3 months, it points to an imminent breakout.

Usually, the longer an instrument remains in a tight range and the price toils, it precedes a breakout.

A break above the the 76.35 handle could bring the 200-day MA into focus at 79.66. However, before that we do have some resistance resting at 78.97.

A rejection of 76.35 may retest support at the 100-day MA resting at 74.68 before the 72.38 handle comes into focus.