Oil Price Forecast: Supply Drop, Fed Pause, and Venezuela Deal Drive Prices Higher

Oil prices continue to rise from long term support zone driven by fresh supply data, cautious central bank policy and significant shift in Venezuelan exports. The market is reacting to short-term disruptions and long term geopolitical resets. WTI Crude Oil (CL) rose above $63 while Brent Crude Oil (BCO) reached $69.

U.S. Inventory Drop and Demand Signals Support Oil

The U.S. Energy Information Administration (EIA) reported a 2.3 million barrel drop in commercial crude oil inventories last week as shown in the chart below. This drop in inventories puts total stockpiles at 423.8 million barrels which is about 3% below five-year seasonal average.

However, gasoline and distillate stocks moved in opposite directions. Gasoline stocks rose by 200,000 barrels while distillate stocks rose by 300,000 barrels. It is seen that production of gasoline jumped to 9.6 million barrels per day and that of distillate declined to 4.8 million. This imbalance is an indicator of the change in refinery output which may be caused by changing demand.

Fed Caution and Venezuela Oil Deal Add More Fuel

Federal Reserve kept interest rates unchanged at 3.50%–3.75% in the first meeting of 2026. After three cuts last year, the central bank paused due to sticky inflation and slowing job growth.

The cautious stance by Federal Reserve indirectly helped oil market. A pause in rate cuts helped stabilise U.S. dollar but continued inflation fears have added rate premiums to oil. The energy market is main source of pressure on prices as prices rose with the devaluation of US dollar. The weaker US dollar makes oil cheaper to international buyers which is a support to the demand.

The geopolitical factors are also in favor of oil prices. Citgo bought Venezuelan oil for the first time in 2019. The deal came after the signing of U.S.-Venezuela deal after the capture of President Maduro and the ascension of the interim President Delcy Rodriguez. The cargo of heavy crude of some 500,000 barrels was arranged through Trafigura for delivery in February.

This is a clear indication of the arrival of Venezuelan barrels to the market. Trading houses are again shipping and U.S. is opening doors to sanctioned supplies. Citgo refineries are made for heavy crude and are located to process it. This shift presents new degree of complexity to the global supply dynamics and could change flows in the next few days.

Crude Oil Technical Analysis

Oil Weekly Chart – Rebound from Long-Term Support

The oil prices are rebounding from long-term support area as shown in the weekly chart below. It is observed that the oil price failed to break below $55 and found strong support. To initiate a strong rebound toward higher levels, the immediate resistance remains $65.

However, a breakup of $65 will trigger another rally toward $75. As long as the price remains below $75, the broader picture still remains bearish. The rebound from this long-term support is due to long-term consolidation around support area, which indicates that short-term direction for oil market might remain higher.

Oil Daily Chart – 200-Day SMA Breakout

The daily chart shows that the price has broken above 200-day SMA and continues to rise. After consolidating between 50- and 200-day SMA, the price is now going toward $65. A breakup of $65 may find next resistance around $70.

Oil 4-hour Chart – Bullish Momentum

The short-term direction of oil price remains higher, as seen by 4-hour chart below. The strong bullish pattern above $55 and then the breakout above the $62 area indicate a positive trend in the short term. The strong resistance remains at $65.50, and a breakout above $65.50 may trigger a rally toward $70.

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