Crude Oil Forecast: The Barrel Moves Toward the Critical $70 Zone

• The sharp bearish movement in WTI crude oil during January has brought the price closer to the key support zone at $70. This level could be crucial in determining whether bearish pressure intensifies further in the coming sessions.

   

• The anticipation surrounding today’s Federal Reserve decision adds uncertainty to the future direction of global demand. This factor has helped maintain the bearish bias in crude oil.

WTI crude has accumulated a loss of more than 8% in value since mid-January of this year. The current downward movement continues to gain momentum due to growing concerns over global oversupply and uncertainty regarding the Federal Reserve’s decision later today.

Fed Decision Day

The much-anticipated first Federal Reserve decision of the year has arrived. Currently, markets are pricing in a 99.5% probability (according to the CME Group) that the interest rate will remain at 4.5% until the next meeting on March 19.

Source: Data - FXStreet

What truly matters is whether the Fed considers pausing rate cuts going forward. This will be clarified through Jerome Powell’s speech following the interest rate decision announcement. High interest rates in the United States may continue to impact the country’s economic outlook, which in turn could affect global oil demand in the long run. For the WTI market, it is crucial for central banks to adopt a dovish stance, where lower rates support global economic recovery and increase energy demand. If this does not happen, downward pressure on crude oil could intensify due to expectations of weaker demand in the coming months.

WTI Technical Forecast

Over the last 10 trading sessions, WTI crude has only recorded two bullish sessions against eight bearish ones, reinforcing a strong bearish bias. This movement could persist if uncertainty surrounding global demand and the increase in U.S. production following Trump’s arrival at the White House continue.

Source: StoneX, Tradingview

• Trend Break: Since December 10, 2024, a short-term bullish trend had formed, pushing prices up to a high of $80 over the past two months. However, increasing selling pressure has broken the trendline and already crossed the 200-period simple moving average. If this bearish pressure persists, the current upward trend could come to an end in the coming sessions.

   

• RSI: The RSI line is exhibiting a significant bearish pattern, recently breaking below the neutral level of 50. As it moves further downward, bearish momentum could strengthen in the short term, increasing selling pressure and potentially leading to a more sustained downtrend.
  

  Key Levels:

   

• $76: The nearest resistance level to current price movements. A breakout above this level could reignite buying pressure and restore momentum to the bullish trend that had been in place since December.

   

• $70: Arguably the most critical support level for crude oil in the short term. It aligns with neutral levels maintained over the past three years and also coincides with the barrier marked by the 50- and 100-period moving averages. Price fluctuations around this level could invalidate the recent bullish trend and establish a more pronounced bearish bias in the crude oil market.

Written by Julian Pineda, CFA – Market Analyst