Crude Oil Update: WTI Recovers After Three Weeks of Losses

WTI prices have posted a rebound of more than 1% in recent trading hours after facing consistent bearish pressure for the past three weeks. This recovery comes despite recent comments from former President Donald Trump, who over the weekend announced the possible imposition of new tariffs.

Inflation Concerns

During yesterday’s session, Trump stated that a 25% tariff on steel and aluminum imports into the U.S. would be announced at the start of this week. He justified the measure as a way to strengthen domestic industry and protect it from unfair competition. He also warned that drastic measures could be implemented in the coming days against countries that have threatened retaliatory actions.

Despite these announcements, crude oil has reacted unexpectedly, registering a bullish session not seen since mid-January. This suggests that the market may be considering crude as an inflation hedge, as a new trade war could drive up global costs, impacting stock markets and increasing demand for safe-haven assets.

Moreover, the imposition of tariffs could impact global crude production, as some countries might reduce their planned extraction levels, limiting supply and helping sustain or even increase the price of WTI. As one of the most in-demand commodities, oil could establish itself as a strong asset for investors amid rising economic uncertainty, which in the long term could maintain a persistent bullish bias.

On the other hand, the market appears to have absorbed much of the uncertainty regarding tariffs, as recent comments have not halted crude’s bullish momentum. This is happening despite projections of lower global demand in 2025 due to a possible economic slowdown. However, the market seems to believe that oil has already undergone a sufficient correction, allowing for the return of buying pressure.

Saudi Arabia’s Role

On February 6, Saudi Aramco announced a price increase for light crude, ranging between $2.4 and $3.9 per barrel for the Asian market, along with a $3.2 per barrel increase for shipments to Europe and the Mediterranean.

This move reflects the oil giant’s confidence in strong demand from Asia and Europe and also serves as a strategy to counter production issues in Russia, where sanctions linked to the Ukraine conflict have affected supply.

This unexpected price adjustment has improved market sentiment in the short term. If Saudi Arabia maintains its optimism about global demand, this factor could also influence investor sentiment. As long as price increases continue, WTI buying pressure could strengthen in the upcoming sessions.

WTI Technical Outlook

Over the past three sessions, oil has recovered more than 2% of its value, forming a technical rebound from the key support level of $70. Although this movement suggests possible stabilization, it is still considered a correction within the prevailing downtrend. For this momentum to turn into a stronger recovery, buying pressure would need to persist and break through key resistance levels.

Source: StoneX, Tradingview

• Sideways Movement Persists: WTI continues to oscillate within a lateral channel, with $76 as resistance and $70 as support. The last bearish movement failed to break below the lower boundary, indicating that crude could continue consolidating within this range, maintaining a neutral long-term outlook.

   

• Buyers Begin to Emerge:

   

  • RSI: The RSI line continues to show an upward slope, now approaching the neutral level of 50. This indicates that recent bullish impulses have been strong and could shift market sentiment.
    
    
  • MACD: Both the MACD line and the signal line have started to rise, while the histogram is approaching neutral 0, suggesting that there is room for early buying momentum.

   

  These indicators reflect that the downtrend initiated in January is losing strength. If they remain above neutral levels, bullish pressure on crude could strengthen in the short term.

   

  Key Levels:

   

• $72: Near-term resistance, aligned with the 50- and 100-period simple moving averages. If the price consistently moves above this level, a stronger bullish bias could develop in the coming sessions.

   

• $70: Critical support level, aligning with the lower boundary of the lateral channel. If price action moves below this level, the previous bearish bias could be reactivated, restoring downside momentum.

   

• $67: Final support, corresponding to multi-month price lows within the lateral channel. If the price breaks below this level, the sideways formation could be at risk, potentially giving way to a stronger bearish trend.

By Julian Pineda, CFA – Market Analyst