Sentiment:
- The broader market is cautious in a risk-off environment, which typically translates to concerns about demand and the strength of the US dollar. However, the market is not in a state of panic as the Fear Index is at around 30, opening room for either direction.
- Social Media (X/Twitter): The current tone is positive, as participants expect USOil to rise within the range of 57.50-65.00 in the near term, anticipating an upcoming upward breakout.
- The COT report shows extremely bearish sentiment regarding the latest data from 26/9 (following the US government shutdown), so we can only have a snapshot of more than a month ago. Although the current sentiment may or may not be as extreme (we need to wait for the latest data), it still reflects the state of market positioning.
- I think that Retail is unaware of positioning extremes and is more focused on technical breakout. It may lead to a sentiment shift as a result of a technical breakout and changes in the fundamental narrative.
Fundamental:
A. OPEC+ Production Shift:
- Narrative: OPEC+ has pivoted to MORE cautious supply management. After nine consecutive monthly increases, the group is now implementing only a modest 137k bpd increase for Dec 2025, followed by a production pause for the entire first quarter of 2026.
- Rationale: Healthy market fundamentals, low inventory levels, seasonal demand
- It means more supportive than what we observed earlier in 2025. Q1 2026 pause suggests OPEC+ acknowledges oversupply risks and is being disciplined. One more thing to note is that the current price is also not entirely factored into this narrative.
B. Geopolitical Risk Premium Returning:
- Narrative: Recent US/EU sanctions on Russian energy companies and escalating tension in oil-producing regions are providing price support.
- Market impact: This narrative provides a fundamental floor for price at least till the end of this year.
C. Bearish Fundamentals - Oversupply into 2026:
- Narrative: Despite the OPEC+ pause, global oil inventories are expected to rise through 2026 on weak demand growth and non-OPEC supply increases (such as the US production)
- Factors: global inventories forecast to rise through 2026, weak demand from China, tariff uncertainties and US production at record levels.
- Market impact: Bearish medium-term outlook for Q1-Q2 2026.
Technical:
- USOIL broke the small blue channel and is expected to reach the measured level at around 65, confluence with the Sep resistances.
- If USOIL can hold above 60 (retest the broken channel), it may resume its momentum to retest the key resistance at 62 first, then 65, as measured by the move upon breaking.
- Conversely, closing below the support at 59.30 may invalidate the short-term upward view and open the door for further decline, potentially retesting the swing low at 56.80.
Conclusion:
- Despite a short-term upward momentum until year-end, the prospect for USOIL in 2026 is not as promising.
- Therefore, a range of 65-70 is possible for the short term upward plan; however, any surge bejond that may open another opportunity for counter-trade setups in Q1-Q2 2026.
Analysis by: Dat Tong, Senior Financial Markets Strategist at Exness
- The broader market is cautious in a risk-off environment, which typically translates to concerns about demand and the strength of the US dollar. However, the market is not in a state of panic as the Fear Index is at around 30, opening room for either direction.
- Social Media (X/Twitter): The current tone is positive, as participants expect USOil to rise within the range of 57.50-65.00 in the near term, anticipating an upcoming upward breakout.
- The COT report shows extremely bearish sentiment regarding the latest data from 26/9 (following the US government shutdown), so we can only have a snapshot of more than a month ago. Although the current sentiment may or may not be as extreme (we need to wait for the latest data), it still reflects the state of market positioning.
- I think that Retail is unaware of positioning extremes and is more focused on technical breakout. It may lead to a sentiment shift as a result of a technical breakout and changes in the fundamental narrative.
Fundamental:
A. OPEC+ Production Shift:
- Narrative: OPEC+ has pivoted to MORE cautious supply management. After nine consecutive monthly increases, the group is now implementing only a modest 137k bpd increase for Dec 2025, followed by a production pause for the entire first quarter of 2026.
- Rationale: Healthy market fundamentals, low inventory levels, seasonal demand
- It means more supportive than what we observed earlier in 2025. Q1 2026 pause suggests OPEC+ acknowledges oversupply risks and is being disciplined. One more thing to note is that the current price is also not entirely factored into this narrative.
B. Geopolitical Risk Premium Returning:
- Narrative: Recent US/EU sanctions on Russian energy companies and escalating tension in oil-producing regions are providing price support.
- Market impact: This narrative provides a fundamental floor for price at least till the end of this year.
C. Bearish Fundamentals - Oversupply into 2026:
- Narrative: Despite the OPEC+ pause, global oil inventories are expected to rise through 2026 on weak demand growth and non-OPEC supply increases (such as the US production)
- Factors: global inventories forecast to rise through 2026, weak demand from China, tariff uncertainties and US production at record levels.
- Market impact: Bearish medium-term outlook for Q1-Q2 2026.
Technical:
- USOIL broke the small blue channel and is expected to reach the measured level at around 65, confluence with the Sep resistances.
- If USOIL can hold above 60 (retest the broken channel), it may resume its momentum to retest the key resistance at 62 first, then 65, as measured by the move upon breaking.
- Conversely, closing below the support at 59.30 may invalidate the short-term upward view and open the door for further decline, potentially retesting the swing low at 56.80.
Conclusion:
- Despite a short-term upward momentum until year-end, the prospect for USOIL in 2026 is not as promising.
- Therefore, a range of 65-70 is possible for the short term upward plan; however, any surge bejond that may open another opportunity for counter-trade setups in Q1-Q2 2026.
Analysis by: Dat Tong, Senior Financial Markets Strategist at Exness
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.