Crude oil prices have risen by approximately 9% since the beginning of the year, reaching a peak of $81.64 two days ago, on Monday, January 13, 2025. This is the highest level in 5 months, specifically since August 13, 2024. Currently, oil prices hover near $80.50, amid the prevailing uncertainty in the oil market, which is subject to a variety of conflicting factors.
As for the positive factors influencing oil prices, the most notable ones include:
- The ongoing cold wave in the United States, Europe, and elsewhere, which naturally increases demand for heating fuel on one hand and raises production shutdown risks in the U.S. on the other.
- A decline in U.S. oil inventories.
- The new wave of U.S. sanctions against Russian oil and energy.
- Potential tariffs from the incoming Trump administration, which have added to these concerns.
However, several factors are putting pressure on crude oil prices, the most significant of which are:
- The strength of the U.S. dollar, which generally has a negative impact on oil prices.
- Trump’s pledge to increase and support oil production in the United States.
- The abundance of supply from outside OPEC+ countries.
- Weak demand from China.
Standard Chartered Bank expects that crude oil prices will range between $90 and $95 this year.
From a technical standpoint, the indicators suggest that oil prices will continue to rise for the following reasons:
- Golden Cross: A bullish crossover occurred between the 20-day moving average (gray line) at $75.38 and the 50-day moving average (blue line) at $73.97 on January 3, 2025.
- Relative Strength Index (RSI), which is currently at 72 points, indicating the overbought zone, suggesting upward momentum for oil.
- Positive Directional Indicator (DMI+), which is at approximately 37 points, compared to the Negative Directional Indicator (DMI-) at around 10 points. The large gap between these two indicators means strong buying pressure on oil. Additionally, the Average Directional Index (ADX) is around 32 points, indicating that the momentum of this upward trend is strong.
It is noteworthy that any upward breakout above the resistance level of $81.64 could have a significant likelihood of reaching the psychological barrier of $82. On the other hand, if there is a downward breakout below the strategic support level, which is the 200-day moving average at $78.78, there is a possibility of a drop to the psychological support level of $75.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
