Crude Oil at a Crossroads: Geopolitics, Demand Shifts, and Market Uncertainty

Crude oil markets are navigating a complex landscape shaped by geopolitical risks, shifting demand dynamics, and technical signals. US airstrikes on Houthi targets have reignited supply concerns, while stronger Chinese retail sales data has bolstered hopes for improved demand. However, China’s crude imports remain weak, prompting refiners to tap into reserves for the first time in 18 months. Meanwhile, Saudi oil shipments to China are set to decline due to refinery maintenance despite OPEC+ maintaining its production strategy. On the technical front, bearish indicators are weighing on crude prices, with key support and resistance levels shaping the near-term outlook.

Oil Prices Climb on Houthi Strikes, China Hopes

Crude oil futures rose modestly on Monday as US airstrikes on Houthi targets in Yemen fueled supply concerns, while stronger Chinese retail sales data lifted demand hopes. Brent crude settled at $70.50 per barrel, its highest in two weeks, while WTI closed at $67.09. However, gains were capped by potential Russia-Ukraine peace talks. Meanwhile, Goldman Sachs lowered its long-term oil price forecasts, citing slower US economic growth and expected OPEC+ production increases starting in April.

China Taps Oil Reserves as Imports Dip Amid Price Pressures

China tapped into its crude oil inventories for the first time in 18 months as refiners processed more oil amid weak imports. In the January-February period, refinery throughput exceeded available crude by 30,000 barrels per day (bpd), signaling a rare stockpile drawdown. Crude imports fell 5% year-over-year, partly due to reduced Russian shipments following US sanctions and high global oil prices. Brent crude peaked at $82.63 in mid-January before retreating, potentially encouraging refiners to resume buying. Meanwhile, refinery activity increased modestly, supported by holiday demand and new capacity at Shandong Yulong Petrochemical.

Saudi Oil Flows to China Slide as Refineries Undergo Maintenance

Saudi Arabia’s crude exports to China are set to drop in April to their lowest level in over a year, with allocations falling to 35.5 million barrels from 41 million in March. The decline is partly due to maintenance at Sinopec-owned refineries, which will take at least 700,000 barrels per day offline through May. Despite OPEC+ sticking to its production hike plans, China’s demand for Saudi oil remains subdued. Meanwhile, Russian and Iranian oil imports to China are rebounding as non-sanctioned tankers step in to replace vessels hit by US sanctions.

Technical Analysis: Crude Oil Slides as Bearish Signals Dominate

Crude oil prices have retreated from their January 15 peak of $79.30 per barrel, reflecting a shift in market sentiment driven by bearish technical signals. The formation of a bearish Harami pattern marked the end of the prior uptrend, while a failure swing reversal at $74.42 and a break below $71.64 confirmed increased selling pressure.

Further reinforcing the bearish outlook, crude prices have closed below the 50-period Exponential Moving Average (EMA), with the Momentum oscillator dipping below 100 and the Relative Strength Index (RSI) slipping under 50, signaling heightened downside risks.

Key support levels to watch include $64.92, $63.02, and $59.94. However, a decisive break above $67.87 could signal a shift in sentiment, paving the way for a potential rebound toward resistance at $70.08, $72.02, and $73.70.

Conclusion

Crude oil markets remain in flux as geopolitical tensions, shifting demand patterns, and technical pressures shape price movements. While supply concerns and signs of Chinese economic resilience offer support, weak imports, refinery maintenance, and bearish technical signals weigh on sentiment. Traders will closely monitor geopolitical developments, OPEC+ production strategies, and key price levels to gauge the next market direction.