Bearish Risks Growing for Crude
Crude oil prices are continuing to push heavily lower through the middle of the week. A sustained drop in US demand recently, the prospect of an end to the Russia-Ukraine war, an upcoming hike in OPEC+ and now the fear that Trump’s tariff war will send the US into recession, are all combing to weigh on crude sentiment this week. The futures market is now testing the key 67.45 level support, having fallen around 17% from YTD highs.
Russia -Ukraine Peace Prospects
Growing speculation that Trump will eventually secure a peace deal between Russia and the Ukraine has been a major downside catalyst for crude markets. The removal of supply disruption risks alongside the prospect of Russian oil returning to market is creating headwinds for bulls. Given the expected upcoming increase in OPEC+ oil output in April, the supply backdrop is turning more bearish here. Indeed, with recent US crude inventories levels seen rising steadily (reflecting weakening demand), fears of a deeper break lower in crude are rising.
US Data & Trade Tariffs
Looking ahead this week, traders will also be watching incoming US labour market data. Concerns that Trump’s tariff war could lead the US into recession are having a clear bearish impact on US crude demand expectations. Additionally, the global demand outlook is also suffering as a result of the burgeoning trade war with US now caught in tariff exchanges with Mexico, Canada and China. If trade tensions continue to escalate, oil prices could easily plumb fresh multi-year lows in coming weeks.
Technical Views
Crude
The sell off in crude has seen the market trading down to test the 67.45 level. This has been a major support zone over the last two years and a break here will be firmly bearish, opening the way for a move down to 63.83 and beyond. To the topside, 72.61 remains the key level bulls need to overcome to alleviate near-term downside risks.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.