Key Points:
- CL-OIL hit a low of $56.690, down 2.68% from the open of $58.252.
- MACD is indicating negative momentum, with the market trending downward.
- U.S. crude stockpiles fell by 1.1 million barrels, offering some positive signs amidst broader bearish sentiment.
Oil Prices Drop Amid Rising Trade War Concerns
Oil prices have experienced a notable drop, with CL-OIL (West Texas Intermediate crude) falling to its lowest levels in over four years.
The steep decline in oil prices is attributed to mounting concerns surrounding the ongoing trade war between the U.S. and China, the world’s two largest economies. This conflict has led to fears of a global recession, which in turn threatens oil demand.
Technical Analysis
Picture: CL-OIL continues its downward movement with key support at 56.690, as seen on the VT Markets app.
CL-OIL decreased by 1.04%, closing at 57.645 after opening at 58.252. The commodity saw a decline, reaching a high of 58.365 before dropping further to close near 57.645.
The moving averages (MA 5,10,30) indicate a bearish trend, with the shorter-term moving averages crossing below the longer-term ones. This suggests potential further downside movement. The MACD (12,26,9) confirms this sentiment, with the MACD line (blue) remaining below the signal line (yellow), showing a negative histogram.
Key levels to monitor include 58.365 as immediate resistance and 56.690 as support. A break below support could suggest further declines, while a rebound above resistance could indicate a reversal.
U.S.-China Trade War Intensifies
The escalation of the U.S.-China trade war was marked by U.S. President Donald Trump’s imposition of a 104% tariff on Chinese imports, which came into effect on April 5. Beijing has retaliated by increasing its tariffs on U.S. goods, which has further fueled fears of a global economic slowdown and reduced oil consumption.
The ongoing tensions and the risk of prolonged tariffs have amplified worries that global oil demand, especially from China, could take a severe hit.
OPEC+ Production Increase Adds to Pressure
OPEC+ has also contributed to the bearish outlook by agreeing to increase output by 411,000 barrels per day in May, a move expected to exacerbate the supply glut in the market. With demand concerns intensifying, Goldman Sachs has lowered its price forecasts, predicting that Brent crude could fall to $62 by December 2025, with further declines to $55 by December 2026.
Mixed Data on U.S. Crude Inventories
In an unexpected twist, U.S. crude inventories fell by 1.1 million barrels in the week ending April 4, according to data from the American Petroleum Institute (API). This contrasts with analyst expectations for a build of around 1.4 million barrels. The official data from the U.S. Energy Information Administration (EIA) is due later, which may provide more insights into the demand trends in the U.S.
Oil’s Market Outlook
The outlook for oil remains volatile, with traders closely monitoring the ongoing trade tensions, OPEC+ decisions, and U.S. inventory data. Short-term fluctuations are expected, but the overall bearish sentiment may persist unless there are significant signs of demand recovery, especially from China.
