Oil prices, which had been rising steadily over the past two weeks, saw a sharp decline today. Concerns over rising supply and technical resistance sparked a major selloff.
West Texas Intermediate (WTI) crude had surged nearly $10 in recent sessions, climbing from under $55 to approach $65. The rally was driven by geopolitical tensions and expectations of tighter supply. However, the upward momentum stalled when WTI reached the 20-day Simple Moving Average (SMA) on the weekly chart, a level that had previously acted as strong resistance. Prices then began to fall, dropping sharply to $61.65.
Earlier in the day, prices hit nearly $65 after the U.S. Treasury imposed sanctions on an Iranian shipping executive, Seyed Asadoollah Emamjomeh, accused of coordinating illicit Iranian oil and LPG sales. This action reignited fears of supply disruptions in the Persian Gulf, providing initial support to oil prices.
However, the rally was short-lived. Reports emerged that OPEC+ members are planning to increase oil production for a second consecutive month. The news, which could be formalized in June, led traders to expect looser supply conditions later in the year, causing a shift in sentiment.
Further pressure came from the latest U.S. Energy Information Administration (EIA) report. The report revealed a surprise increase in crude oil inventories by 0.224 million barrels, contrary to the expected drawdown. This raised concerns that supply may soon outpace demand, adding to the downward pressure on prices.
Weekly EIA Crude Oil Report:
- Crude Oil Inventories: Increased by 0.224 million barrels, against expectations of a 0.770 million barrel draw.
- Gasoline Inventories: Dropped by 4.476 million barrels, more than double the expected 1.375 million.
- Distillate Inventories: Fell by 2.353 million barrels, a larger drop than the expected 0.028 million.
- Cushing, OK Stockpiles: Decreased by 0.086 million barrels, less than last week’s 0.654 million barrel drop.
Despite the selloff, some losses were tempered by hopes that President Trump might ease tariffs on Chinese imports. The possibility of improved trade relations lifted market sentiment, helping WTI avoid falling below $60 in the short term, though downside risks remain.
Oil prices are facing short-term bearish risks as multiple factors converge. OPEC+ production hikes, rising U.S. inventories, and technical resistance create a cautious outlook for crude. While geopolitical events like Iranian sanctions may cause short-term volatility, the broader trend suggests consolidation or further declines unless new supply shocks occur.
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