Crude Oil Update: WTI Barrel Weakens Amid Potential Production Increases

• New policies suggesting a possible increase in U.S. production have created an imbalance in global supply expectations, which has helped strengthen the bearish bias in the WTI barrel.

   

• The recent sell-off in crude oil has driven the price to a key support zone at $76. Drops below this level could increase selling pressure in the coming sessions.

The WTI barrel has already recorded five consecutive sessions of losses, with a depreciation of more than 5%. This bearish movement is attributed to uncertainty caused by potential increases in global oil production following Trump’s arrival at the White House.

The New Role of the United States

Since Trump’s inauguration as president (January 20), the market has faced several unexpected surprises. One of the most notable has been the decision to reverse various environmental policies, such as the Paris Climate Agreement, in the short term. This measure is fully aligned with the declaration of a national energy emergency in the United States, aimed at increasing the production of natural gas and oil within the U.S., as well as eliminating restrictions in regions such as Alaska.

Initially, OPEC’s plan, agreed upon in December 2024, aimed to gradually stabilize global production through cuts of up to one million barrels per day. However, this effort could be undermined by the new policies from the White House. Traditionally, the United States has remained detached from the major decisions of the global oil market, but this scenario could change with its new authorizations for exploration and the use of fracking, one of the fastest extraction techniques. This could significantly tilt the global production balance, turning the current bearish pressure into a sustained selling bias for WTI.

On the other hand, the White House has proposed a consistent increase in trade tariffs with other countries. Among these measures, a 25% tariff on products imported from Canada and Mexico stands out, which could take effect in early February. This recent aggressiveness in trade relations could have global repercussions, as the countries affected by these tariffs may experience trade imbalances and slower domestic economic growth. The uncertainty about lower economic outlooks is closely linked to reduced energy demand, which, combined with the expected increase in supply from North America, could exacerbate the imbalance between lower demand and higher global production, further increasing the bearish bias on WTI.

WTI Technical Forecast

Source: StoneX, Tradingview

• Wide Lateral Range: WTI prices have respected a lateral range between the ceiling at $85 per barrel and the floor at $68 per barrel since March 2023. Currently, bearish movements have brought the price to the middle of the range, and greater selling pressure could push it toward the lower limit of the range.

   

• RSI: The RSI line shows a significant downward slope, falling from overbought levels and rapidly approaching the neutral zone at 50. Oscillations below this level could indicate a dominance of bearish positions over the last 14 sessions and could continue to intensify the current bearish bias.

   

• ADX: The ADX line is near the 40 level, a point not seen since 2023. This indicates that the current bearish movement has strong trend momentum, which could pose a risk to the buying positions held since December 2024.

  Key Levels:

   

• $85: The most important resistance level on the chart, coinciding with the upper boundary of the lateral range. Oscillations near this level could reactivate the bullish trend observed since early December 2024.

   

• $76: A key support level coinciding with the middle of the lateral range and the barrier of the 200-period simple moving average. Sustained drops below this level could intensify short-term selling pressure.

   

• $68: Definitive support. A drop to this level would confirm total dominance of sellers in the market and could initiate a clearer and more pronounced bearish trend for crude oil.

Written by Julian Pineda, CFA – Market Analyst