USOIL Pressured by Trade Tensions and Oversupply Concerns
Fundamental approach:
- USOIL prices declined this week, pressured by renewed US-China trade tensions and persistent concerns about oversupply.
- USOIL fell following President Trump's threat of additional 100% tariffs on Chinese goods, starting 1 Nov, which reignited fears of reduced global energy demand from the world's largest consumers.
- In addition, easing Middle East tensions removed risk premiums, capping gains. OPEC+ is continuing its production increases, with the group adding 137k bpd in Nov.
- US crude inventories also rose by 3.7 mln barrels in early Oct, exceeding analyst expectations and reinforcing concerns about a supply glut.
- Prices may face further downward pressure as global inventory builds are expected to average 2.6 mln barrels per day through 4Q. However, any progress in US-China trade negotiations or unexpected supply disruptions from Eastern Europe could provide upside support.
Technical approach:
- USOIL strongly declined after retesting EMA21. The price created lower swings, indicating bearish momentum persists.
- If USOIL remains below the resistance at 60.30, the price may continue to decline toward the following support at 55.50.
- On the contrary, closing above 60.30 may prompt a further correction to retest the following resistance at 62.00.
Analysis by: Dat Tong, Senior Financial Markets Strategist at Exness
