- Oil futures failed to hold their ground around the $63 per barrel area earlier this week and as negative sentiment reignited, the energy commodity slipped lower, closer to the recent bottom reached in the aftermath of Trump’s “Liberation Day” announcement.
- Despite hopeful commentary from the Trump administration and the signaling that the US is willing to negotiate with China in regards to import tariffs, traders still remain pessimistic about the demand outlook of the commodity.
- Adding more downward pressure on the commodity has also been yesterday’s dismal GDP print from the United States, which casted doubts on whether the world’s largest economy could continue growing with at a decent pace.
- More specifically, the report showcased a surprise -0.3% contraction in the 1st quarter of 2025 from the 2.7% reading of the prior quarter, but also a materially larger downfall than what the market anticipated. This contraction was the first in 3 years and highlights the economic instability created by the recent tariff policies. According to reports, the primary factors associated with the fall were the administrative choices and fiscal tactics of President Trump at his first 100 days in office.
- Looking onwards, crude traders’ attention will invariably fall upon the decision of the oil cartel, OPEC+, on Monday the 5th and the updates regarding their production levels.
- Speculators expect OPEC+ to boost supply by accelerating their planned production hikes at its upcoming meeting, which would oversupply the market and possibly press lower crude’s price.
- Oil Reports indicated that Saudi Arabia is briefing allies and industry experts to say the kingdom is unwilling to shore up the market with further output cuts and can endure a prolonged period of lower prices. If such scenario comes in play, crude prices may venture lower, heading into territory last seen before in January of 2021.
Technical Analysis of Oil
WTI Chart – Negative momentum drives WTI prices closer to fresh 4 year lows
- Resistance: 60.00 (R1), 63.60 (R2), 67.00 (R3)
- Support: 55.15 (S1), 52.50 (S2), 50.00 (S3)
After a brief period of consolidation last week, negative momentum strengthened as buying interest dissipated and the bears regained control of the commodity’s price, dragging it closer to the $55.15 support area. We maintain our bias for a bearish outlook given the recent acceleration of the fall, yet we note that price action may be approaching rapidly overextension levels once again, hinting that a possible (short lived ?) rebound maybe in the making.
Supporting our case, is the RSI indicator that is been driven closer to the 30 level, traditionally considered as oversold territory/ The ADX indicator registers a value of 45, showcasing strong momentum and -DI with a value of 40, highlights that selling pressure drives the prices lower.
The MACD indicator also validates our bearish call given the recent crossover of the signal line with the MACD. Should the bears remain in control, we would reasonably expect to see WTI retesting and breaking below the $55.15 (S1) support area and possibly challenging the $52.50 (S2) zone, hitting fresh 4-year lows. Should the bulls find enough resolve and take over, we may see the commodity rebound from here and break above the $60.00 (R1) resistance level and move closer to the $63.60 (R2) resistance barrier.
