Last Wednesday was a tough day for the crude oil market, as some negative news weighed on prices. The first catalyst was the statement of the Kazakh Minister of Energy that national interests take precedence over those of OPEC+ in terms of production levels. This has affected the market with supply expected to rise.
Later in the day, we received news that several OPEC+ members had asked the group to agree to another accelerated increase in oil production for June at their May 5 meeting. It was puzzling to see OPEC+ accelerating production increases amid slowing growth due to trade wars.
Several factors for such decisions, including the more likely factors cited by CNBC, guided the group’s optimism about oil demand later in the year, and the desire of OPEC leadership to send a warning signal to Kazakhstan, Iraq, and even Russia, about the cost of continuing overproduction.
More broadly, I think trade negotiations are what really matters to the market, and that’s probably what keeps the decline limited.
On the daily chart, we see crude oil consolidating around the key resistance zone 62.00-64.00. Here, sellers are ramping up purchases with a clear risk above the resistance level in preparation for a drop to new lows. On the other hand, buyers want to see price break through higher to extend the rally to the main trend line around the 68.00 level.
On the hourly chart, we see a secondary support around 61.75. If the price reaches there, we expect buyers to intervene with a clear risk below this level in preparation for a rise to the 68.00 level. On the other hand, sellers will look for a bearish breakout to increase their downside forecast to 59.00 later.
Progress of nuclear talks puts pressure on oil prices
The price of West Texas Intermediate (WTI) oil fell to around $62.70 a barrel during European trading hours on Monday. Crude oil prices continue to fall as nuclear talks between the United States and Iran progress, increasing the likelihood of Iranian crude returning to the market. Moreover, expectations that the Organization of the Petroleum Exporting Countries (OPEC) and its allies, OPEC+, could increase production for the second consecutive month have further pressured oil prices.
However, WTI prices may see some recovery, driven by hopes of easing trade tensions between the US and China. On Friday, China announced that some U.S. imports would be exempt from its exorbitant 125% tariffs, raising optimism that the protracted trade dispute between the world’s two largest economies is nearing resolution.
In addition, U.S. Agriculture Secretary Brooke Rawlins reported on Sunday that the Trump administration is in daily discussions with China on tariffs. Rollins also noted that negotiations with other trading partners are progressing, and that many trade deals are “very close” to completion. U.S. Treasury Secretary Scott Biscent did not support Trump’s claim that talks are underway with China, while Beijing denied any discussions.
Despite these developments, sentiment may be negatively affected by signs of slowing demand from China. Reports indicate that some Chinese manufacturers are suspending production and looking for alternative markets due to U.S. tariffs, leading to lower orders and affecting employment. Although the disruptions have not yet become widespread, they could eventually hurt oil demand, with China still the largest importer.
Falkshahi pointed to weak oil demand, which fell from 750,000 barrels per day to 500,000 barrels. U.S. shale oil is under pressure, with a breakeven price of $65 per barrel.
Tariff war plunges oil prices globally
Oil prices fell after U.S. President Donald Trump’s announcement of tariffs, raising fears of a global trade war, but easing concerns for energy importers such as Turkey, analysts told the state-run Anadolu Agency.
On April 2, Washington imposed 10% tariffs on goods from its trading partners, pushing Brent crude down 9.1% to $65.74 a barrel, the lowest weekly close since August 2021. WTI crude fell 9.8% to $62.10.
China’s retaliatory response pushed Brent crude to $58.22 a barrel on April 9, its lowest level in four years, before rising 6.7% to $65.47 after a 90-day U.S. tariff pause. Brent crude closed at $64.26, down 2.2%, and WTI crude at $60.97, down 1.8%.
Brent crude rose 4.2% to $66.96 the following week, buoyed by sanctions threats on Iran, but fell 1.6% to $65.87 by April 21 amid US-Iran talks and trade war fears.
WTI crude fell 1.2% to $62.93. Since April 2, Brent has lost 10.5% (USD 7.80) and WTI has lost 10.7% (USD 7.60).
Fereydon Barkishli, of the Vienna Energy Research Group, stated that lower prices will lower Turkey’s energy bill, although a global slowdown could hurt growth.
“Trump’s trade war portends a new economic order, but Turkey is safe for now,” he said, looking to regional trade and reducing dependence on the dollar. On the other hand, sellers will look for a bearish breakout to increase their downside forecast to 59.00 later.
Kepler’s Humayun Falekshahi linked lower prices to weak growth, lowering the US forecast from 2% to 0.8%, and the 12-month average Brent crude from $71 to $66.
