Crude Oil Climbs: Demand Concerns and Cold Weather Set the Stage for Price Shift

Crude oil prices have hit an 11-week high, reaching a peak of $73.69 and currently sitting around $73.02, driven by demand concerns.

U.S. Crude Inventories Decline

Crude oil inventories in the United States fell by 1.442 million barrels in the week ending December 27, 2024. This marks the third consecutive week of decreasing U.S. crude stocks, although the drop was below analysts' estimates. Total crude stocks remain about 5% lower than the five-year average, resting at around 415.6 million barrels. Meanwhile, gasoline stocks increased significantly by 7.7 million barrels, and distillate fuel inventories rose by 6.4 million barrels. This unexpected small drop in crude oil may signal lower demand, potentially leading to reduced prices as consumer behavior shifts toward the end of 2024.

Cold Weather Boosts Crude Oil Demand

Cold weather is likely to increase the usage of crude oil, particularly for heating fuels such as diesel and heating oil. Forecasters have predicted colder temperatures in the United States and Europe, which may lead more people to rely on these fuels to stay warm. This rise in heating needs could boost crude oil consumption during the winter months.

Price Resistance and Support Levels

The near-term resistance for crude oil is around $73.70; breaking this level could push prices higher, possibly reaching $75 or $76. On the downside, immediate support is at $72.50, with any breach below targeting levels of $71.80, $70.75, $70, $69, $68, or even $66.60. It may be advisable to buy on dips around $72.50, with a stop-loss around $71.70 and a target price of $75.