WTI Crude Oil Analysis Outlook: Key Resistance Levels at $70.88

West Texas Intermediate (WTI) crude oil prices have consistently held above the $70 per barrel mark, supported by a combination of factors influencing the broader energy market. A recent Bloomberg Intelligence report highlights that U.S. commercial crude inventories are projected to decline by approximately 537,000 barrels per day by the end of 2025. This anticipated reduction, combined with an expected surge in domestic oil production under the incoming Trump administration, is likely to bolster oil prices. However, the full impact of increased domestic output may take several months or even years to materialize fully.

Meanwhile, the US Dollar Index (DXY), which measures the dollar’s performance against a basket of major currencies, has experienced a slight pullback. This decline follows recent multi-year highs and is attributed to profit-taking as traders reduced their dollar positions towards the end of the year. Despite the Federal Reserve’s anticipated rate cut, the accompanying hawkish tone indicates a slower pace of future rate reductions. This shift in monetary policy could provide long-term support for the US dollar.

As of this writing, WTI crude oil is trading at approximately $70.22 per barrel, while Brent crude oil is priced at $73.27 per barrel.

Short-Term Outlook and Key Resistance Levels

Analysts predict the potential for a modest rally in oil prices during the first quarter or the first half of 2025, driven by expectations of increased economic activity under the new administration. However, WTI faces several critical resistance levels that need to be surpassed to sustain upward momentum. The $70.88 level, which aligns with the 50-day Simple Moving Average (SMA), currently serves as a significant resistance point. A decisive break above this level could pave the way for a move toward $75.27, the high recorded on January 12th.

Despite this optimistic outlook, the approaching year-end prompts caution among traders. Many may choose to book profits as markets close out the year, potentially limiting immediate upside potential. On the downside, the 55-day SMA, which has been steadily declining, is losing its significance as a support level. Instead, the $67.12 level—a key support observed during May, June, and the last quarter of 2024—has emerged as the primary support zone. A breach of this level could signal a deeper decline toward the 2024 lows at $64.75 and $64.38.

Broader Implications for the Energy Market

The interplay between declining U.S. crude inventories, domestic production growth, and fluctuations in the US Dollar Index will shape oil prices moving into 2025. While increased production under the Trump administration promises long-term support, the immediate trajectory of oil prices remains contingent on overcoming key technical levels and broader economic trends. Traders are advised to monitor these developments closely while exercising caution in light of end-of-year market dynamics.