Crude Oil Faces Downside Risks Despite Short-Lived Rebound
Crude oil prices attempted to recover on Friday after a steep selloff, but ongoing supply pressures and geopolitical uncertainties kept the market under bearish influence. Brent crude briefly edged higher after reaching a multi-year low, but resistance at $70 per barrel remains firm. Market sentiment remains cautious as traders weigh OPEC+ output hikes, U.S. tariff disputes, and potential sanctions on Russian oil.
For the week, Light Crude Oil Futures settled at $67.04, down $2.72 or -3.90%.
Technically, the market is in a weak position after closing on the bearish side of a pair of 50% levels at $69.53 and $70.78. Both indicators are resistance. WTI crude oil is also trading below the 52-week moving average at $71.24. The tone will remain bearish and traders are likely to continue to sell rallies until the moving average indicator is overtaken.
Will OPEC+ Supply Expansion Keep Prices Under Pressure?
OPEC+ confirmed its plan to increase production by 138,000 barrels per day in April, marking the first supply boost since 2022. While the increase is relatively small, traders fear it could signal further production hikes in the coming months. The additional barrels add to an already weak demand environment, limiting upside potential for crude.
Meanwhile, global supply chains are adjusting to shifting U.S. policies. The Trump administration is considering at-sea inspections of Iranian oil tankers, which could disrupt Tehran’s crude exports. While this could tighten global supply, it remains unclear whether it will offset the downward pressure from increased OPEC+ output.
Can U.S. and China Manage Trade Uncertainty?
Trade disputes remain a major headwind for crude oil demand. The U.S. recently imposed new tariffs on Canadian, Mexican, and Chinese goods, prompting retaliatory measures from China. While these tariffs do not directly target crude oil, they raise concerns about global economic growth, which could dampen energy demand.
However, China has hinted at potential stimulus measures to counteract economic slowdowns. If enacted, these policies could help stabilize demand, providing a modest buffer against trade-related downside risks. Traders are closely watching for further policy shifts that could alter the crude oil demand outlook.
Brent Oil Price Forecast
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See all Brent Oil forecastsU.S. Inventory and SPR Developments Add Market Volatility
The latest EIA data revealed a surprising 3.6-million-barrel build in U.S. crude inventories, reinforcing concerns of sluggish demand. Seasonal refinery maintenance contributed to the increase, with refinery utilization dropping to 85.9%. Gasoline and distillate stocks declined, indicating some resilience in refined product demand.
Meanwhile, the U.S. Strategic Petroleum Reserve (SPR) remains at historically low levels after significant drawdowns under the previous administration. Energy Secretary Chris Wright estimated it would take $20 billion and several years to refill the SPR to its maximum capacity, adding another layer of uncertainty to the long-term supply picture.
Market Outlook: Bearish Bias with Potential for Supply Shocks
Despite a modest rebound on Friday, crude oil remains under pressure. OPEC+ production increases, rising U.S. inventories, and trade-related demand concerns continue to weigh on prices. Without a major catalyst, upside moves are likely to be capped by the 52-week moving average at $71.24.
However, the market remains highly reactive to geopolitical developments. Any sudden supply disruptions—such as escalations in the Russia-Ukraine conflict, an unexpected OPEC+ policy shift, or new U.S. sanctions on key producers—could trigger a sharp price reversal. For now, the bearish bias dominates, with traders closely monitoring macroeconomic and geopolitical developments.
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