Oil Markets at a Crossroads: Supply Risks, Rising Stockpiles, and Bearish Signals

Oil markets remain volatile as supply risks, inventory changes, and shifting production policies shape price movements. While crude prices have rallied for four consecutive days, driven by declining fuel inventories and geopolitical tensions, rising U.S. stockpiles and concerns over global demand pose potential headwinds. OPEC’s expected delay in production hikes further adds to market uncertainty as economic and geopolitical pressures complicate supply strategies. Meanwhile, technical indicators suggest bearish momentum, with key support and resistance levels in focus. Traders and analysts are closely monitoring these developments for potential shifts in market direction.

Oil prices rose for a fourth consecutive day as declining U.S. fuel inventories and concerns over Russian supply disruptions supported the market. Brent crude and WTI both saw gains. Although U.S. crude stockpiles saw a slight build, gasoline and distillate inventories declined, balancing overall inventory levels. Supply risks intensified as Russia attacked Ukrainian gas infrastructure, while a Ukraine drone strike disrupted Kazakh oil exports via the Caspian Pipeline Consortium. Meanwhile, potential restarts of Iraqi Kurdistan oil flows and U.S. tariff concerns dampened bullish momentum, raising fears about global demand.

U.S. crude oil inventories continued to rise for the fourth consecutive week, with commercial stockpiles increasing by 4.6 million barrels to 432.5 million barrels, exceeding analyst expectations. Stocks at Cushing, Oklahoma, the Nymex delivery hub, climbed 1.5 million barrels to 23.3 million barrels. Despite the build in crude inventories, gasoline and distillate stocks declined, with gasoline demand slipping to 8.2 million barrels per day. Meanwhile, refinery utilization edged lower to 84.9%, and U.S. crude production remained steady at 13.5 million barrels per day.

OPEC is expected to delay its planned production hikes in April, as uncertainties in the global economy and geopolitical risks complicate the oil market outlook. The report highlights the difficulties of gradually ending production cuts without destabilizing prices, as factors such as U.S. policy shifts, trade tensions, and sanctions on Iran and Russia contribute to market volatility. Rising fiscal pressures on OPEC members may push them to prioritize revenue generation. Meanwhile, China’s oil demand is projected to grow by 300,000 barrels per day, though downside risks remain. U.S. efforts to boost domestic supply are expected to have a limited impact.

After reaching $79.30 per barrel on January 15, crude oil prices have trended lower, reflecting a shift in market sentiment driven by bearish technical signals. The formation of a bearish Harami pattern marked the end of the previous uptrend, indicating the potential for a sustained downturn. This was further reinforced by a failure swing reversal, where the peak at $74.42 remained below the prior high, followed by a break below the $71.64 support level, confirming increased selling pressure.
The bearish momentum is further substantiated by prices closing below the 50-period Exponential Moving Average (EMA), while the Momentum oscillator crossing below the 100 level signals additional downside risk. The Relative Strength Index (RSI) slipping below 50 aligns with this negative outlook, pointing to strengthening selling interest.
If the downward pressure persists, traders may monitor key support levels at $70.05, $66.98, and $62.39 as potential targets. However, a shift in sentiment favoring buyers could see crude oil prices testing resistance levels at $74.42, $75.76, and $78.48 in the near term.

The oil market remains in a delicate balance as supply risks, inventory trends, and shifting production policies continue to shape price movements. While crude prices have shown resilience with a three-day rally, rising U.S. stockpiles and concerns over global demand create potential headwinds. OPEC’s hesitation to increase production further underscores the uncertainty surrounding supply dynamics. Meanwhile, technical indicators suggest a bearish outlook, with key support and resistance levels guiding market sentiment. As geopolitical tensions and economic uncertainties persist, traders and analysts will closely watch these factors for signals on the market’s next direction.