Crude oil bounces back after testing early April lows - can the rebound continue amid ongoing supply concerns?
Crude oil lost 1.99% on Monday, extending its short-term downtrend after OPEC+ announced production increases over the weekend. However, today the market is staging a rebound, with prices climbing 2.7% from technical oversold conditions in what appears to be classic "sell the rumor, buy the fact" price action.
For oil markets specifically, these developments are worth monitoring:
- OPEC+ decided to further speed up oil production hikes for a second consecutive month, with Saudi Arabia set to lead the cartel in unwinding over two years of production cuts.
- The U.S. Federal Reserve will likely leave interest rates unchanged on Wednesday, with markets eagerly awaiting the decision that could significantly impact broader market sentiment and dollar strength.
- Several financial institutions have adjusted their forecasts downward, with Barclays lowering its Brent crude forecast by $4 to $70 a barrel for 2025 and setting its 2026 estimate at $62 a barrel, citing "a rocky road ahead for fundamentals." Goldman Sachs also lowered its oil price forecast by $2-3 per barrel.
Daily Chart: Potential Reversal
Yesterday, oil approached its April 9 low of around $56 (depending on futures contract series). This support seems to be holding today, but the market may face more uncertainty as tariff developments and tomorrow's Fed decision are likely to increase volatility in the markets.
Resistance level is now at $60, while support remains around $56.
Weekly Chart: Bearish Picture
On the weekly chart, the key resistance remains around $65, marked by previously broken lows from 2023 and 2024. The price action suggests a potential double-bottom formation if the current rebound can gain momentum.
Conclusion
Crude oil has rebounded on technical factors and bargain hunting after the OPEC+ decision to boost output sent prices down yesterday. While concerns about market surplus persist, the $56 level appears to be a significant psychological support point where buyers are stepping in.
For now, my short-term outlook is neutral.
Here’s the breakdown:
- Crude oil is rebounding significantly today after testing early April low.
- Technical oversold conditions have triggered short-covering and bargain hunting.
- The larger-than-expected OPEC+ production increase could continue to pressure prices in the coming weeks.
- Ongoing trade tensions between the US and China add another layer of uncertainty for oil demand forecasts.
- The upcoming Fed decision tomorrow could influence dollar strength and oil prices.
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Thank you.
Paul Rejczak,
Stock Trading Strategist