Oil News: Crude at Risk of Sharp Drop as Inventories Surge, Trade Uncertainty Grows

Crude Oil Prices Edge Higher but Face Resistance at Key Technical Levels

Light crude oil futures are trading slightly higher on Friday, with prices hovering between the 50-day moving average at $71.02 and the 200-day moving average at $70.77. The market’s reaction to these technical levels will likely dictate short-term direction, with traders closely watching for a breakout or breakdown.

The current three-month trading range spans from $64.78 to $79.44, and prices are now testing the key retracement zone between $72.11 and $70.38. A sustained move above the 50-day moving average could reinforce bullish sentiment, but resistance remains strong at $72.11. Conversely, a break below the 200-day moving average could trigger increased selling pressure, with a breach of the Fibonacci support at $70.38 potentially accelerating losses toward $67.09.

At 10:11 GMT, Light crude oil futures are trading $71.26, up $0.65 or +0.92%.

Tariff Concerns Keep Oil on Track for Weekly Decline

Despite Friday’s slight gains, crude oil remains on course for its third consecutive weekly loss, as global trade tensions continue to weigh on demand outlooks. Brent crude, while higher on the day, is down 2.6% for the week, while West Texas Intermediate (WTI) has lost 2.1% over the same period.

The recent downward pressure comes amid renewed tariff threats from the U.S., with President Trump imposing a 10% tariff on Chinese imports while also temporarily suspending planned levies on Mexico and Canada. Analysts suggest that while tariffs introduce uncertainty, which can sometimes be bullish for commodities, the broader concern is that prolonged trade disputes will dampen global GDP growth, thereby reducing oil demand.

Iran Sanctions Provide a Potential Supportive Factor

The U.S. Treasury announced new sanctions targeting individuals and tankers involved in Iran’s crude exports to China, an incremental effort to curb Tehran’s oil revenues. Societe Generale projects that these sanctions could halve Iran’s oil exports, potentially tightening global supply.

However, the immediate market reaction has been muted. Traders remain focused on demand risks, with concerns that tariffs and retaliatory measures will suppress consumption growth. The combination of geopolitical risks and economic uncertainty is creating a volatile trading environment, where short-term price action may be dictated by shifting macroeconomic sentiment.

Stockpile Surges Add to Bearish Pressures

Further weighing on crude prices is the unexpected surge in U.S. crude inventories, which rose sharply last week. The build, larger than anticipated, highlights softer demand as U.S. refineries undergo seasonal maintenance. Additionally, President Trump’s renewed commitment to boosting U.S. oil production has added to bearish sentiment, reinforcing concerns over supply outpacing demand in the near term.

Market Outlook: Short-Term Bearish with Key Technical Watchpoints

Crude oil prices remain at a critical juncture, with technical levels playing a key role in short-term direction. A sustained move above the 50-day moving average at $71.02 would provide upside momentum, while failure to hold above the 200-day moving average at $70.77 could invite further selling.

Fundamentally, downside risks persist due to trade-related demand fears and rising U.S. crude inventories. However, the ongoing geopolitical uncertainty surrounding Iran sanctions could provide intermittent support. Traders should watch for a decisive break of key support or resistance levels to gauge the next major move in crude prices.

More Information in our Economic Calendar.