- Crude oil continues to struggle as rallies are sold into, with resistance near $58 to $60 and weakening demand outweighing geopolitical headlines.
- Oversupply from Russia, the U.S., and OPEC keeps pressure on prices.
The light sweet crude oil market initially tried to rally during the trading session on Monday, but struggled as the $58 level above is a little bit of a short-term barrier. But when you look at the totality of the chart and the price action of the second half of this year, you can see it's just been a gradual sell every rally event. That's even true, a couple of weeks back when the Russian sanctions were announced. The price is lower than when it first reacted to that news. And the question, of course, is why? Well, the answer is that Russia sells crude oil to Europe either way.
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Oversupply and Weak Demand Continue to Dominate
Russian oil has been making it to the market via back channels and moving past sanctions for years. This latest bit of sanctions doesn't change anything. The other side of the equation is that demand is dropping. And if there's less demand, it really doesn't matter.
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So, all that being said, when you look at the technical analysis, it does make a certain amount of sense that the 50-day EMA and the downtrend line both offer resistance, almost acting like a ceiling at this point. And I think the $60 level is just that, at least in the short term, it's a bit of a ceiling.
If we continue to drop from here, the $55 level could be targeted underneath, which had been a hard floor back in April of 2024, where we formed a massive double bottom. The oversupply situation coming from Russia, the United States, and OPEC for a fairly benign economy globally is going to continue to offer downward pressure on oil. If we break down below $55, then obviously that's a big deal. But I think in the short term, the optimal trade, least for me and what's worked so far, has been fading signs of exhaustion after short-term rallies. I think that continues to be the case.
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