Oil Prices Rebound After Sharp US Inventory Drop and US–China Trade Optimism

Oil prices rebounded on Wednesday following a sharper-than-expected drop in US crude and fuel inventories. Brent oil (BCO) rose to settle at $65 per barrel, while WTI oil (CL) hit the $60.50 level.

The rebound was driven by data from the US Energy Information Administration (EIA). The agency reported a 6.86 million barrel decline in crude stockpiles, well above the forecasted 211,000 barrel drop.

This unexpected draw challenged the prevailing assumption that the oil market is headed for a supply glut. This is especially significant with OPEC+ raising production and US output sitting at record highs.

This data indicates a strong implied demand for oil. It suggests that the consumption side of the equation remains healthy, offsetting concerns about oversupply.

As inventories decline and demand holds firm, markets are reevaluating the idea of a near-term surplus. This has helped support oil prices and improve sentiment across energy markets in the short term.

Trade Optimism Between the US and China Supports Prices

President Donald Trump’s upbeat tone ahead of his summit with Chinese President Xi Jinping also helped lift oil prices. He predicted a positive outcome from the talks, which were scheduled for Thursday in South Korea. In addition, the US and South Korea finalised the terms of a long-delayed trade deal.

These developments injected optimism into global markets, easing fears that tariffs and trade tensions could drag down economic growth and energy demand. Oil prices responded positively to the shift in sentiment.

Fed Rate Cut Adds Liquidity, But Economic Uncertainty Limits Oil Rally

The US Federal Reserve cut interest rates by 25 basis points, as expected. However, Chair Jerome Powell’s cautious tone on the economic outlook added uncertainty to the market narrative. While rate cuts typically support commodity prices, concerns about slowing global growth persist.

This mixed signal suggests that although oil benefits from increased liquidity, investor caution remains due to the Fed’s unclear forward guidance.

Sanctions on Russian Oil Giants Offer Temporary Lift

Oil prices posted their biggest weekly gains since June, driven by US sanctions on Russian energy companies Lukoil and Rosneft. These sanctions, imposed in response to the Ukraine conflict, raised fears of supply disruptions and pushed prices higher.

However, the initial surge faded as markets began pricing in the possibility that Russia could reroute exports or that the overall supply impact may be limited. On the other hand, the rally faced fresh headwinds after reports emerged that OPEC+ may raise output in December.

These expectations could counteract the bullish momentum from inventory drawdowns and sanctions. With OPEC+ acting cautiously amid volatile demand projections, oil prices may struggle to find long-term support without sustained global growth.

Crude Oil Technical Analysis: Bearish Setup Signals Further Downside

The long-term outlook for WTI crude oil shows a strong negative trend. Prices have broken below a symmetrical triangle pattern near the $67 level. Currently, they are consolidating around the black dotted trendline in the middle of a descending channel.

A break below $55 would likely trigger a sharp decline in oil prices. Additionally, the RSI remains below the 50 level, which confirms the bearish momentum and suggests further downside potential.

WTI Crude Oil Weekly – $55 Support as Key Breakdown Level

The negative trend in oil prices is also confirmed by the weekly chart, which shows that last week’s rebound occurred from the long-term support near $55.

A break below this support level would trigger and extend the strong bearish momentum. However, a recovery above $70 would negate the downside pressure and signal further upside potential toward the $80 area.

WTI Crude Oil Daily – Bearish Momentum Below $63 Resistance

The short-term outlook for WTI crude oil also appears bearish, as shown on the daily chart below. Prices recently hit the 50-day SMA near the $62 level and have continued to trade lower.

The market is now consolidating around the $60 support zone, and a break below $59 could trigger further downside toward the $55 area.

However, a break above $63 is needed to regain upward momentum and target the $66 region. As long as oil prices remain below the $80 level, the broader trend is likely to stay biased to the downside.