Oil Under Pressure: Trade Tensions, Rising Inventories, and Market Uncertainty

Crude oil markets remain under pressure as technical indicators point to continued downside, amplified by rising U.S. inventories and escalating trade tensions. While demand concerns weigh heavily on prices, potential supply disruptions from Iran could introduce volatility. With key economic data from the UK, U.S., and Canada on the horizon, traders will closely watch for shifts in market sentiment and price movements around critical support and resistance levels.

Thursday 14:00 (GMT+2) – UK: Official Bank Rate (GBP)
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Friday 15:30 (GMT+2) – Canada: Employment Change (CAD)
Friday 15:30 (GMT+2) – USA: Non-Farm Employment Change (USD)

Since reaching a high of 79.30 on January 15, crude oil prices have been steadily declining due to a combination of technical and fundamental factors. A Bearish Engulfing pattern indicated the start of this downward movement, followed by a drop below both the 20-period and 50-period Exponential Moving Averages (EMAs), which further intensified selling pressure. Additionally, the development of a failure swing, where the recent peak of 74.42 did not exceed the previous peak, confirmed the prevailing downtrend. Meanwhile, the Momentum oscillator remains below the 100 threshold, and the Relative Strength Index (RSI) is below 50, suggesting that negative momentum is likely to continue in the near term. However, the 20-period EMA has not yet crossed below the 50-period EMA.

If buyers take control of the market, traders may shift their focus to the following four potential resistance levels:
73.16: The first level of resistance is identified at 73.16, which aligns with the weekly Pivot Point, PP, calculated using the standard methodology.
74.42: The second price target is determined at 74.42, corresponding to the high point from February 3.
76.36: The third price target is established at 76.36, representing the weekly resistance, R2, calculated using the standard Pivot Points methodology.
77.95: An additional price objective is estimated at 77.95, mirroring the weekly resistance, R3, calculated using the standard Pivot Points methodology.

If sellers maintain control of the market, traders may focus on the following four key support levels:
70.35: The initial support level is seen at 70.35, representing the trough recorded on January 4.
68.30: The second support level is positioned at 68.30, aligning with the weekly support, S3, calculated using the standard Pivot Points methodology.
66.98: The third downside target is noted at 66.98, corresponding to the 261.8% Fibonacci Extension drawn from the low point, 71.58, to the high point, 74.42.
62.39: An additional downside target is determined at 62.39, reflecting the 423.6% Fibonacci Extension drawn from the low point, 71.58, to the high point, 74.42.

Oil prices fell over 2% as rising U.S. crude inventories signaled weak demand, while escalating U.S.-China trade tensions raised concerns about global economic growth. The EIA reported a sharp build in crude and gasoline stockpiles, with refiners cutting runs amid soft gasoline demand. China imposed tariffs on U.S. oil and other energy commodities, pressuring prices further. Meanwhile, former President Trump’s pledge to restore sanctions on Iran introduced supply risks, potentially offsetting bearish sentiment. The oil market remains caught between trade-related demand fears and the possibility of Iranian supply disruptions.

Crude oil remains under sustained downward pressure, driven by weak demand signals, rising U.S. inventories, and heightened trade tensions between the U.S. and China. While technical indicators suggest continued bearish momentum, potential supply disruptions from Iran could introduce volatility. With key economic data releases from the UK, U.S., and Canada ahead, traders will remain focused on market shifts and critical price levels to gauge future movements.