Crude Oil Week Ahead: Is There More Downside?
Crude Oil Week Ahead: The transition from trade wars to trade deals has taken a significant toll on markets. Upcoming geopolitical developments, OPEC’s monthly report, and the US inflation report—following concerns over China’s deflation—add further uncertainty to the oil market this week.
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Key Events:
- China’s CPI drops to one-year and 16-year lows at -0.7%
- OPEC’s monthly report is awaited this week amid the oil market’s downturn, following supply cut unwinding plans
- Trade war developments continue to impact market sentiment
- US CPI and consumer confidence data are set to indicate further risks to economic growth and oil demand forecasts
A notable rebound has been observed in the crude oil market from September 2024 lows amid declining oil demand expectations and rising oil supply projections. The key question remains: Will the rebound hold?
Crude Oil Week Ahead: UK OIL, USOIL, and Crude Oil Futures 3-Day Time Frames
Source: Tradingview
China’s CPI Drops to One and 16-year Lows
China’s Consumer Price Index (CPI) dropped from 0.5% to -0.7% on Sunday, retesting levels last seen in February 2024 and October 2009. Meanwhile, Chinese Producer Price Index (PPI) metrics remain in the deflationary zone at -2.2%. These reports further exacerbate concerns regarding China's economic growth and oil demand amid ongoing trade war turbulence. Additionally, Chinese new loan data, set to be released this week, will provide further insight into the nation’s economic pressures.
Upcoming OPEC Monthly Report
Following OPEC’s recent announcement of plans to begin unwinding its supply cut quotas in April, crude oil is rebounding from September 2024 lows, aligning with a support zone that has been in place since 2021. This critical support level presents two possible scenarios: a steep downside breakout in the event of a breach or another strong consolidation and rebound. Given the current market pressure, OPEC’s monthly oil report—scheduled for release on Wednesday—will be a crucial indicator of the group’s outlook.
Trade War Developments
With advocating for short-term economic pain to achieve long-term US growth, the replacement of income tax revenue with tariff revenue through ongoing trade wars continues to generate uncertainty. Alarming headlines are limiting bullish sentiment and dampening economic growth forecasts until clear trade agreements emerge.
The US CPI report, due this week, will provide additional insight following last month’s sticky year-over-year inflation rate of 3%.
Risks of retaliatory measures between China, Mexico, Canada, and the US—alongside the upcoming reciprocal tariffs in April—are keeping uncertainty high. Despite exemptions and delays affecting overall market confidence, the timeline for transitioning from trade wars to trade deals will be a key factor in determining the bearish impact on global markets.
Technical Analysis: Quantifying Uncertainties
Crude Oil Week Ahead: US OIL – 3day Time Frame – Log Scale
Source: Tradingview
Following crude oil’s rebound from the September 2024 low of $65.20, the risks of a reversal remain uncertain amid ongoing bearish pressures. A clean break below $65 could extend losses toward $63.80, which may determine whether the market holds neutral and rebounds or breaks further into a steeper bearish trend towards $60 and $55.
On the upside, if the rebound sustains above $67, resistance levels at $68.70, $70.80, $72.50, and $74 could come back into play.
Written by Razan Hilal, CMT
Follow on X: @Rh_waves
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