WTI crude continues to consolidate in the short term, with volatility fading.
Crude oil gained 0.85% on Wednesday, essentially moving sideways after sharp declines between Monday and Tuesday. The sell-off was triggered by news of de-escalation in the Middle East. Today, oil prices are up 0.1% as investors remain cautious amid a stock market rally and upcoming tariff-related developments.
For oil markets specifically, these developments are worth monitoring:
- U.S. crude inventories fell by 5.8 million barrels last week, far exceeding expectations of a 1.2 million-barrel drop. It followed a prior week’s 11.5 million-barrel draw.
- The inventory data eased concerns over slowing U.S. fuel demand. Despite economic uncertainty and trade tensions, consumption remains resilient.
- The truce, brokered by the U.S., lowered geopolitical risk in the Middle East. Analysts noted it likely ensured safe passage through the key Strait of Hormuz.
- Oil also got a boost from a weakening U.S. dollar. The dollar fell further after reports that Trump may soon name a successor to Fed Chair Jerome Powell.
Daily Chart: Beneath Previous Lows Again
Crude oil sold off sharply following the de-escalation of the Middle East conflict, reaffirming the key medium- to long-term resistance zone between $75 and $80. Support, meanwhile, is around $60, marked by the late May local low.
Although the market reached its highest level since January last Friday, it remained below the early January highs.
Conclusion
Crude oil is extending its short-term consolidation this morning, holding near the key technical level of $65. However, volatility is likely to return, and the market remains highly sensitive to geopolitical headlines.
For now, my short-term outlook is neutral.
No positions are currently justified from a risk/reward perspective.
Here’s the breakdown:
- Crude oil prices sold off between Monday and Tuesday and are now trading sideways.
- The ongoing tariff-related volatility, combined with economic data, is adding to market uncertainty.
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Thank you.
Paul Rejczak,
Stock Trading Strategist
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