Crude oil prices have been fluctuating between the levels of $70 and $75 per barrel for the past two months and are currently hovering around $73. It appears that the horizontal sideways trend will remain dominant at this stage, especially amid the prevailing uncertainty in the oil market, which is influenced by several divergent factors that keep prices at these levels.
As for the negative factors that are putting pressure on oil prices, the most prominent are:
- US President Donald Trump’s commitment to increasing and supporting oil production in the United States.
- The abundance of supply from outside the OPEC+ organization, such as the United States, Canada, Brazil, and Guyana.
- The global decline in oil demand, particularly from China – the world’s largest oil importer – as most of the Chinese economic data has been disappointing and below expectations, with the latest being retail sales that pointed to weak consumption in China.
- The strength of the US dollar, which negatively impacts oil prices in light of the flexibility of the US economy and the outperformance of most economic data over analyst expectations, in addition to Federal Reserve Chairman Jerome Powell’s hawkish speech yesterday, where he reduced his forecast for a 50-basis-point rate cut, contrasting with the market’s expectations of a 75-basis-point cut before yesterday’s Fed meeting.
As for the positive factors affecting oil prices, the most prominent are:
- The extension of voluntary production cuts by OPEC+ by 2.2 million barrels per day until the end of March 2025.
- The continued geopolitical tensions in the Middle East and the Russia-Ukraine war.
From a technical perspective, crude oil is currently trading below the 50-day moving average (blue) at $73.44, but it is hovering above a key support level, the 20-day moving average (gray), at $72.81. A bearish break below this level could lead to a drop to the psychological support level at $70. The Death Cross (the cross between the 50-day and 20-day moving averages) is still in place, and the upcoming challenge is the potential shift from this negative cross to a Golden Cross, which would turn the bearish trend into a bullish one. As for the Relative Strength Index (RSI), it is hovering around the 50-point level, indicating neutrality, meaning there is no clear direction for oil prices.
Please note that this analysis is provided for informational purposes only and should not be considered as investment advice. All trading involves risk.
