(Bloomberg) -- Oil began 2025 by rising to the highest since October, buoyed by bullish technical indicators and shrinking US crude stockpiles.
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West Texas Intermediate jumped 2% to settle above $73 a barrel, and Brent climbed above $76 after government data showed US crude inventories fell 1.18 million barrels last week, the sixth straight drawdown. The gain broke crude out of the roughly $6 range it has been trading in since mid-October, though analysts weren’t certain the advance will stick.
The EIA data was “too messy of a report to draw a strong conclusion from,” with end-of-year shuffling of inventories for tax purposes muddying the outlook, said Jon Byrne, an analyst at Strategas Securities. “Regardless, crude is at the upper end of our range target, and we’d expect organic buyers to dry up at these levels.”
The price gain was also aided by technical indicators, with the two benchmarks closing above their 100-day moving averages on Tuesday for the first time since October. WTI’s prompt spread — the difference between its two nearest contracts — strengthened to 63 cents in backwardation, a signal demand is outweighing supplies in the short term.
WTI posted the smallest annual price move in almost two decades last year, and investors are bracing for an oversupply this year, making it harder for OPEC+ to revive idled production. Still, the unpredictability of a second presidential term by Donald Trump is clouding the outlook.
China’s economic recovery remains uncertain, with recent data showing factory activity slowed its pace of expansion in December. The rapid adoption of electric vehicles and renewable fuels also is chipping away at gasoline demand.
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--With assistance from Alex Longley.
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