Oil prices stall as technical resistance and China stimulus weigh on markets
Crude oil futures are edging lower on Wednesday, pressured by strong technical resistance levels and market uncertainty surrounding China’s latest economic stimulus measures. Light crude is struggling to maintain upward momentum after hitting key resistance at $72.21 and the 50-day and 200-day moving averages near $73.01. As traders digest mixed signals, near-term gains are expected to be limited, with potential corrections targeting the Fibonacci support at $69.79.
The inside trading pattern today highlights indecision among market participants, suggesting volatility could be imminent. Some traders appear cautious, choosing to buy on dips rather than chase breakouts.
At 09:59 GMT, Light Crude Oil futures are trading $71.17, down $0.39 or -0.54%.
China’s Stimulus Fails to Fully Convince Investors
Oil prices steadied after a 1.7% rally on Tuesday, sparked by China’s announcement of aggressive stimulus aimed at reviving its economy. Measures include interest rate cuts and increased government funding, the largest economic intervention since the pandemic. However, market optimism was tempered by concerns that the stimulus might fall short of delivering long-term economic growth. Analysts stress that without further fiscal support, China’s economic recovery—and consequently, its oil demand growth—could remain subdued.
According to Yeap Jun Rong, a market strategist at IG, the lack of immediate traction in China’s oil demand, combined with weaker U.S. consumer confidence data, is also keeping the market cautious. U.S. consumer confidence hit a three-year low in September, reflecting concerns about job availability, which could weigh on domestic energy consumption.
U.S. Crude Inventory Draws Provide Some Support
Despite the macroeconomic headwinds, falling U.S. oil stockpiles have offered some support for crude prices. The American Petroleum Institute (API) reported a 4.34 million barrel decline in U.S. crude inventories last week, alongside reductions in gasoline and distillate stockpiles, down by 3.44 million and 1.12 million barrels respectively. UBS analyst Giovanni Staunovo sees this as a bullish signal, indicating tightening global supplies, which could eventually lead to higher prices.
Geopolitical Tensions Add to Supply Concerns
Escalating tensions in the Middle East, particularly between Hezbollah and Israel, have further underpinned oil prices. With cross-border rocket fire raising fears of a broader regional conflict, market participants are keeping a close eye on potential supply disruptions in the region.
Meanwhile, weather-related risks have eased slightly as a hurricane, initially projected to threaten the U.S. Gulf Coast’s oil-producing regions, has shifted its course toward Florida.
Market Forecast: Short-Term Bearish Outlook
In the short term, crude oil prices are likely to face downward pressure as the market grapples with technical resistance and skepticism over China’s stimulus measures. A correction targeting $69.79 is on the table, particularly if U.S. consumer sentiment and Chinese demand fail to improve. However, ongoing supply constraints and geopolitical risks provide underlying support, preventing a sharp selloff. Traders should remain cautious, looking for opportunities to buy on dips rather than chasing rallies.
====== FXEMPIRE ======
