Oil Prices $1 Higher As China Stimulus Improves Sentiment

Saudi Arabia no longer targets $100 oil, which sent US crude oil prices to $67, but we’re seeing a bounce from China stimulus comments. Further information from Reuters suggests that the planned December production boost will go ahead, but its impact may be limited due to reductions in some members’ quotas.

Crude Oil Resistance Levels amid Potential for Chinese Stimulus

Crude oil prices have rebounded significantly in the past two weeks, rising above $70 after reaching lows of $60 in August. However, the $72.50 resistance level has repeatedly halted further gains, leading to another price drop below $70 yesterday. Today, sellers pushed US crude down to $67, highlighting the challenge buyers face at this key level.

The persistent global economic slowdown, particularly in China, has been a major factor in oil’s weakness. If China implements stimulus measures to revive its economy, demand for oil could rise. The market is increasingly optimistic about China’s stimulus plans, which has improved risk sentiment and boosted oil prices.

WTI Crude Oil Chart H1 – The 20 SMA Acting As Resistance

China’s Economic Plans and US Data Impact

While China announced plans to spend what is necessary to meet its 5% growth target, details of fiscal support are still unclear. Despite this, WTI crude rose above $68, bolstered by positive US economic data such as Retail Sales and Pending Home Sales, which show that the US consumer remains resilient.

US Pending Home Sales for August 2024

• • Increased by 0.6%, below the 1.0% expectation.
  • Previous month’s figure was revised to -5.5%.
  • The Pending Home Sales Index (PHSI) came in at 70.6, up from 70.2 in the prior month.
• Regional Breakdown:
  • Midwest, South, and West: Monthly contract signings rose.
  • Northeast: Monthly contract signings fell.
  • Year-over-year, pending home sales decreased in the Northeast, Midwest, and South, but increased in the West.
• PHSI Details:
  • Northeast: Declined -4.6% to 61.6, down 2.2% year-over-year.
  • Midwest: Increased +3.2% to 70.0, down 3.6% year-over-year.
  • South: Increased +0.1% to 83.6, down 5.3% year-over-year.
  • West: Grew +3.2% to 58.0, up 2.7% year-over-year.
• Housing Affordability:
  • Affordability improved as mortgage rates declined, with long-term rates approaching 6%.
  • A $300,000 loan could see savings of around $300 per month compared to a few months ago.

US WTI Crude Oil Live Chart