Crude oil outlook: WTI faces a bumpy road in 2025

After rising in the first week of this year, oil prices are now showing a few signs of weakness as investors shift their focus towards Trump’s bearish energy agenda. Ongoing concerns over demand in China will remain in the spotlight, a major factor in OPEC’s supply quota restrictions last year. This week we will have Chinese inflation and loans data to look forward to ahead of more important GDP and industrial production data next week. Meanwhile, the latest US stockpiles report showed inventories fell less than expected and there was big build of stock products, pointing to weak demand. Our crude oil outlook is leaning towards a potentially bearish 2025 for WTI prices.

US crude oil stocks fall less than expected

The latest EIA weekly US crude oil inventories data for the week ending January 3, 2025, came in with a headline print of -959K compared to -184K expected and -1178K last week. The inventory reduction was notably lower than the private data released yesterday showing a -4022K print. The EIA data also revealed stocks of oil products rose sharply, with gasoline coming in at +6330K vs +1504K expected and distillates printing +6071K vs +597K expected. Following the crude oil inventories report, WTI prices eased further lows, having already come off their best levels.

Crude oil outlook: WTI faces challenges from several sources

Looking beyond the weekly inventories report, which can be volatile and sometimes misleading, the crude oil outlook is far from great this year.

This year’s oil prices are caught in a tug-of-war between various forces: China’s evolving economic strategies and geopolitical tension, against Trump’s energy policies, that are deemed bearish for oil prices, plus OPEC’s plans to unwind supply restrictions, another bearish factor, and the accelerating global shift towards clean energy.

So, looking ahead to 2025, the picture remains cloudy, as the upcoming Trump presidency introduces sharp contrasts in trade policies, geopolitics, and economic stimulus plans. These dynamics could push central banks, including the Federal Reserve, toward cautious monetary strategies, potentially stopping it from making further rate cuts amid inflation concerns.

Geopolitics adds another layer of complexity. The fragile Middle East ceasefire remains unresolved, fuelling uncertainty and boosting having demand for commodities like gold while also keeping oil-supply fears elevated.

All told, the outlook is modestly bearish, in what could be a volatile year ahead for oil prices, after a relative stable 2024.

WTI technical outlook: Key levels to watch

Source: TradingView.com

Crude oil prices have been quietly climbing over the past few weeks, but now they face a critical challenge as they approach key resistance levels.

Looking at the chart, WTI is contending with a cluster of resistance factors, including a bearish trend line, the 200-day moving average, and prior support and resistance zones, all converging near the psychologically significant $75.00 mark.

The resistance range spans from $74.55 to $77.50. Monday’s bearish price candle hinted at a possible reversal, though there was no follow-through to the downside on Tuesday. Today however, prices are once again showing weakness on the daily chart, potentially on the verge of creating a bearish engulfing candle.

On the support side, the first key level sits around $71.50, marking the base of the recent breakout. If prices dip further, $70.00 becomes the next target, followed by $68.00.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R

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