Oil Outlook: Oil prices in a free-fall

Since our last report ,oil prices seem to have maintained their bearish tendencies since the start for the week. In today’s report we are to take a look at the shifting state of the US oil market, fundamental issues surrounding both the demand and supply side of the commodity and how they could affect its price and conclude the report with a technical analysis of WTI’s daily chart.   

The situation of the US oil market

US President Trump went through with the imposition of a 25% tariff on imports from Mexico and Canada on Tuesday, alongside increasing fresh duties on Chinês goods.

The implementation of tariffs appears to have led to retaliatory measures from Canada, with Prime Minister Trudeau announcing retaliatory tariffs on US exports.

In turn this may increase market worries, as the spat between the two countries continues to escalate with Trump responding on a TruthSocial post that “Please explain to Governor Trudeau, of Canada, that when he puts on a Retaliatory Tariff on the U.S., our Reciprocal Tariff will immediately increase by a like amount!”, implying that the trade war may continue to escalate.

In turn the trade wars have sparked concern in regards to their impact on economic activity and thus may have weighed on oil prices, as a gloomy economic outlook may imply a reduction in demand for oil as a result.

However, on Wednesday, President Trump stated that he will exempt automakers from his 25% tariff on Mexico and Canada for one month, as long as they comply with existing free trade rules, per Reuters. The announcement may imply that the President could loosen or modify the tariffs in the future, making them more amenable to some extent. Should  that appear to be the case, oil prices may find some support.

Nevertheless, it appears that the administration may continue with the imposition of tariffs which have already resulted in a retaliation by the affected countries. Hence, if the authorities maintain or expand them to include other nations, they could weigh on oil prices.

In our view, we would not be surprised if other countries and blocs, such as the EU, impose tariffs. This could further dampen the mood on the global economic outlook and potentially weigh on oil prices in the future.

OPEC+ confirms increase in productionOPEC+

On Monday, the eight OPEC+ countries—Saudi Arabia, Russia, Iraq, the United Arab Emirates, Kuwait, Kazakhstan, Algeria, and Oman—announced that they met virtually on March 3, 2025.These countries had previously announced additional voluntary adjustments in April and November 2023.

To review global market conditions and the future outlook, they “reaffirmed their decision, made on December 5, 2024.”

They will proceed with the gradual and flexible return of the 2.2 mbd voluntary adjustments, starting on April 1, 2025.

Essentially implying that OPEC+ may be proceeding with their decision to increase the production of oil and thus possibly increase supply, which in turn could weigh on oil prices.

Hence should OPEC+ go through with their intention of increasing oil production, it could weigh on oil prices. Yet, should they decide to renege on their decision, it could instead aid oil prices.

Oil Technical Analysis

WTI Cash Daily Chart

• Support: 62.35 (S1), 58.30 (S2), 53.75 (S3)
• Resistance: 66.60 (R1), 70.40 (R2), 74.15 (R3)

WTICash has moved lower since our last report, clearing our support and now facing resistance at the 66.60 (R1) level.

We adopt a bearish outlook for the commodity’s price. The RSI indicator below our chart supports our case, currently registering near 30, which implies strong bearish market sentiment. Additionally, the downward-moving trendline, established on the 20th of February, strengthens this view.

For the bearish outlook to continue, the price needs to break below the 62.35 (S1) support level. The next target for the bears will be the 58.30 (S2) support level.

For a bullish outlook, a clear break above the 66.60 (R1) resistance line is needed. The next target for the bulls would be the 70.40 (R2) resistance level.l.

For a sideways bias, the commodity’s price should stay between the 62.35 (S1) support level and the 66.60 (R1) resistance line.             

INFORMAÇÃO LEGAL IMPORTANTE:
Esta informação não deverá ser considerada como aconselhamento ou recomendação ao investimento, mas apenas como comunicação de marketing.

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