- The bears prevailed late last week and decisively forced WTI futures to break below the longstanding support area near the $61 per barrel area, after President Trump threatened to impose an additional 100% import tariff on Chinese goods and escalated trade tensions.
- The move came after China decided to put in place stricter export controls on rare earths, creating a bottleneck on the supply of the critical metals which are vital in the development of chips, ships, semiconductors and many other technological innovations.
- Crude futures now float north of the $58 per barrel area, near 5-month lows.
- Furthermore, traders scrolled through the contents of the latest International Energy Agency’s short term energy outlook, earlier this week, and found more supporting evidence that excessive supply will keep dragging prices lower. The agency increased its forecast for a record surplus of approximately 4 million barrels a day in 2026, as the oil cartel OPEC+ alliance ramps up output.
- Analysts note nonetheless that crude oil production from the group has trailed the quota ceiling this month, as some members decided to go forth with compensation cuts after over-producing earlier in the year, whereas others struggle to match output quotes due to investment droughts.
- Pressing the brakes and decelerating crude oil’s descent earlier this week, was the announcement from India’s Prime Minister Modi who pledged to halt purchases of Russian oil, after months of pressure from Washington. The Trump administration imposed additional tariffs on the world’s most populous nation to force it to terminate seaborn purchases of Russian crude, indirectly debilitating Moscow’s revenues in order to coerce it into ending the war in Ukraine.
- Overall, weak demand fundamentals and expectations for an oversupplied market in 2025 and through 2026, are expected to keep a lid on top of crude prices of the energy commodity for the time being.
Technical Analysis of Oil
US-China trade tensions flare up, pressuring crude oil near the $58 per barrel area.
- Resistance: 61.50 (R1), 65.60 (R2), 70.40 (R3)
- Support: 58.00 (S1), 55.15 (S2), 52.00 (S3)
Crude futures found temporary support near the $58.00 (S1) after the bears took the initiative and pressed the commodity definitively below the $61.50, then longstanding support level, as US-China tensions flared up. Given the definitive break below and the strength of the bears, we are forced to alter our assessment from sideways to a bearish bias and supporting our case is the RSI reading which currently registers a value of 37, indicating the bears are in control, after detaching from the indecisive area of 50 after nearly 3 weeks. Furthermore, the -DI and +DI severed after being entangled for weeks, with the former registering a value of 35 and the latter, a value of 8, signalling the control of the bears and the scattering of the bulls, with the ADX value of 44 pointing to strengthening of momentum. Should the bears remain in control with a sustaining strength of the momentum, we may see crude break below the $58.00 (S1) support area and head for the $55.15 (S2) support base. On the other hand, should the bulls enter the picture and challenge the bears, we may see WTI revisiting the $61.50 (R1) former support base, now turned resistance, break above and head closer to the $65.60 (R2) resistance ceiling.
