Crude Oil Forecast: WTI Nears Multi-Year Lows on Ukraine Peace Hopes

WTI Crude Oil Key Points

• Reports of a Ukraine-Russia peace deal could exacerbate global oversupply in the oil market.
• This morning’s weak US data suggests that the US economy was already vulnerable before the longest government shutdown in history.
• WTI is nearing a key support zone dating back to March 2021 in the $57 area, which serves as the last near-term line of defense for bulls.

After weeks of deliberation and diplomacy, ABC News reported this morning that Ukraine agreed to the terms of a revised peace deal to end the war with Russia. While details are light at this point (and crucially, “some minor details are outstanding”), markets are reacting positively to the news, driving oil prices lower across the board.

Put simply, a formal end to the war would have massive ramifications for the oil market. Russia is one of the world’s largest producers of oil, but its ability to sell on the global market have been significantly limited by sanctions from the US, EU, and UK in recent years. At the same time, recent Ukrainian drone attacks on Russian refineries have impeded production.

From a broader perspective, the global oil market remains oversupplied, with the IEA forecasting a record surplus in 2026, and the return of Russian oil to the market would only exacerbate that dynamic.

The other news weighing on oil prices today comes from the world’s largest economy, where traders finally got delayed US data on Retail Sales and the Producer Price Index (PPI) from September. Headline Retail Sales rose only 0.2% m/m, below the 0.4% reading anticipated, though “Core” Retail Sales, which filter out more volatile items, came in as expected at 0.3% m/m. Separately, Producer Prices rose by 0.3% m/m as anticipated, but the core version of that report was a tick soft at 0.1% m/m. Taken together, these releases show that the US economy was weaker than expected even before the longest government shutdown in US history.

Finally, the more timely weekly ADP employment report showed a decline of -13.5K jobs per week over the last four weeks, underscoring the risks to the labor market that are upstream of oil consumption.

Crude Oil Technical Analysis: WTI Daily Chart

Source: StoneX, TradingView

From a technical perspective, WTI Crude Oil is extending its drop from last week today, falling by more than -2.5%. As the chart above shows, WTI is nearing a key support zone dating back to March 2021 in the $57 area, which serves as the last near-term line of defense for bulls. If that zone gives way, perhaps on the back of a formal Ukraine peace deal, the next level to watch would be the 61.8% Fibonacci retracement of the 2020-2022 rally under $54.

If bulls are able to defend that support level, we could see a bounce back toward $60, but given the well-established downtrend, traders may look at that as an opportunity to enter short positions at a more favorable price unless and until WTI can break above key previous-support-turned-resistance at $62.

-- Written by Matt Weller, Global Head of Research

Check out Matt’s Daily Market Update videos on YouTube and be sure to follow Matt on Twitter: @MWellerFX