Bearish view
- Sell the WTI crude oil and set a take-profit at $55.
- Add a stop-loss at $65.
- Timeline: 1-5 days.
Bullish view
- Buy crude oil and set a take-profit at $65.
- Add a stop-loss at $55.
The WTI crude oil price crashed to $55 last week, its lowest level since February 2021 as demand concerns coincided with higher oil OPEC output. It then bounced back to end the week at $61.43.
Crude oil faces demand and supply shocks
The WTI crude oil price outlook is bearish as the industry battles numerous demand and supply concerns.
The main demand aspect is that there are concerns that the US and other countries may move into a recession this year. In a note last week, the Energy Information Administration (EIA) warned that demand could drop as uncertainties remains. It also slashed demand estimate for this year and 2025.
At the same time, oil producers are preparing production increases this year. OPEC member countries voted to increase production gradually in the coming months.
Donald Trump is also aiming to boost US oil production as he seeks to lower inflation and ease regulations. He campaigned on a “drill, baby, drill” mantra, which involves boosting production, which currently stands at 13.5 million barrels a day. Any trade deal with other countries will likely involve them buying more oil to reduce the US deficit.
The United States is talking to Russia on ending the war in Ukraine. Any potential deal would end the sanctions that the US and other countries have placed on Russia, a move that would bring more oil online.
Additionally, the US is negotiating with Iran on ending its nuclear power program. A deal would also involve the Trump administration removing sanctions on Iranian oil that have reduced its exports in the past few months.
The WTI crude oil price will react to trade news this week. Signs of de-escalation between China and the US will likely be a bullish sign for oil prices.
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WTI crude oil price analysis
The weekly chart shows that the WTI crude oil price has been in a downward trend in the past few months. It has formed a descending triangle pattern, a popular bearish sign in the technical analysis.
The price has moved below all moving averages and the lower side of the descending triangle pattern. The widest point of this triangle is 38%, meaning that the longer-term target is about $40. This target was achieved by measuring the same distance from the lower side of this triangle.
In the short term, however, the WTI crude oil price may retest the lower side of this triangle and then resume the downtrend.
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