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West Texas Intermediate (WTI) prices hovered above $71.50 per barrel following the American Petroleum Institute's (API) report indicating a 1.442-million-barrel drop in US crude oil inventories. Geopolitical tensions in the Middle East and the ongoing Russia-Ukraine conflict provided additional support for oil prices. However, factors like weaker-than-expected Chinese factory activity and a slower path for US Federal Reserve rate cuts in 2025 limited gains. Concerns over reduced global demand due to a stronger dollar and China's slowing economic recovery weighed on market sentiment. Despite mixed signals, WTI remains supported by supply-side constraints and geopolitical factors.

Key Highlights

* WTI traded above $71.50 after US crude inventories fell.

* API data showed a 1.442-million-barrel drop in US stockpiles.

* Geopolitical tensions supported oil prices amid global uncertainties.

* Fed's cautious rate-cut strategy in 2025 limited upside potential.

* Weaker Chinese economic data raised concerns over oil demand.

West Texas Intermediate (WTI) prices sustained modest gains, trading around $71.60 per barrel during Thursday’s early European session. The rise follows the latest API report, which revealed a 1.442-million-barrel decline in US crude oil inventories for the week ending December 27. Although lower than market expectations of a 3-million-barrel draw, the decline underscores tightening supply, providing price support.

Geopolitical developments such as ongoing tensions in the Middle East and the Russia-Ukraine conflict continue to underpin WTI prices. These factors increase uncertainty in global oil markets, adding to supply-side constraints. However, the Federal Reserve’s cautious approach to rate cuts in 2025, with only two additional reductions projected, has strengthened the US dollar. This currency strength exerts downward pressure on oil prices, as it raises costs for non-dollar buyers, potentially reducing demand.

Adding to the mixed sentiment, China’s factory activity slowed in December, missing expectations and raising concerns over the world's second-largest economy’s oil demand recovery. This data amplifies fears of weaker global demand, creating headwinds for the oil market.

Despite these challenges, WTI’s position above $71.50 reflects resilience, supported by tighter supply dynamics and geopolitical factors. Analysts remain optimistic about near-term support levels, given the mixed market signals.

Finally

WTI sustains above $71.50, backed by supply constraints and geopolitical tensions. However, weak demand signals and dollar strength may cap upside potential in the near term.

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