Commodity Radar: Crude Oil caught between war winds and OPEC’s supply surge. 3 things charts suggest

Crude oil prices traded steady on Wednesday as concerns over higher output from OPEC+ groups were partially offset by supply pressures caused due to the Canadian wildfires along with economic uncertainties in the wake of global trade tensions.

The June crude oil futures on the MCX were trading at Rs 5,473 per Bbl, gaining Rs 18 or 0.33% over the previous closing price. Domestic prices moved in tandem with the international prices.

On the COMEX, the US WTI contracts were trading at $63.71 around 4 PM India time, up by $0.30 or 0.47% while the Brent Oil futures were hovering around $65.93, also gaining by $0.30 or 0.46%.

Commenting on the current trends, Naveen Mathur, Director - Commodities & Currencies at Anand Rathi Shares and Stock Brokers said that the rebound in crude oil prices has been due to ongoing geopolitical tensions and expectations of strong summer travel demand.

“While the bias remains positive, OPEC’s aggressive supply hikes and bearish market sentiment driven by trade war concerns and surplus fears are likely to limit sharp gains,” he said.

Crude oil prices rebounded last month from near $55 per barrel levels and are once again caught in a narrow range of $60–$65, as markets continue to reflect a disconnect between sentiment and reality.

“Trader sentiment has turned extremely bearish due to tariff war fears and OPEC’s aggressive unwinding of supply cuts, raising expectations that global oil balances may shift into surplus. On a year-to-date basis, crude oil is down approximately 12%,” Mathur said.

In his view, the demand for oil remains strong ahead of the travel season even as global inventories remain tighter than usual. So far, the trade war has not shown any major impact on oil demand, he opined.

Recently, OPEC+ announced it would increase oil production by 411,000 barrels per day in July, the third consecutive month of sizable supply hikes. This has led to some disappointment in the Street’s mood, though the impact has been largely capped as the prices have traded in a range.

Mathur said that there are doubts whether the additional oil will actually reach the global market.

The geopolitical risks are also supporting prices and the recent escalation in the Russia-Ukraine war despite the ongoing negotiations in Turkey.

The Anand Rathi analyst also attributed the stalling of nuclear talks between US and Iran, to be supporting the oil prices.

A deal would sanctions against Iran, bringing Iranian oil into the market. Now that appears unlikely, Mathur said.

Outlook

“In the short term, oil prices are likely to remain supported. With steady demand, tight inventories, and heightened geopolitical risks, the bias is tilted upward. However, any significant upside remains capped due to OPEC’s continued unwinding of supply cuts,” Mathur said.

Tech view:

Mathur decodes the tech set-up and here’s what he said:

1) Moving averages: MCX Crude Oil maintains a bullish bias, holding firmly above its 21-Day Moving Average at 5,262, which serves as a key support level.

2) Key levels: The price action is confined to a consolidation range of 5,250–5,450, with immediate resistance at 5,460. A breakout above the psychological level of 5,500 could pave the way for an upside rally toward 5,685, signalling strength in the bullish momentum.

3) MACD: Technical indicators support this outlook, with the MACD trading above the zero line, reflecting sustained positive momentum. The price structure indicates a bullish bias, with key support near 5,250 and resistance around 5,460. A breakout above 5,500 could signal stronger upward momentum, potentially opening the path toward higher levels like 5685-5945.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)