Light crude oil futures declined on Friday as market volatility increased amid U.S. tariff concerns and Iraq’s decision to resume oil exports. Traders are cautious, with significant resistance levels hindering price gains. Key factors influencing the bearish outlook include potential increases in oil supplies from Iraq and Russia, alongside concerns regarding global demand due to tariff escalations.
Light crude oil futures declined on Friday, remaining within the previous day’s trading range, which reflects traders’ indecision and suggests potential volatility. Key resistance levels at $70.35 (Fibonacci) and $70.59 (200-day moving average) are restricting upward movements. A breakout above these hurdles could lead to a surge towards the 50-day moving average and pivot levels at $72.02 and $72.08.
Conversely, sustaining prices below the retracement zone and the 200-day moving average could attract significant selling pressure, with a possibility of prices dropping to this week’s low of $68.36. A breach of this support might instigate a further decline, with $67.06 identified as the next significant support level. As of 11:11 GMT, Light Crude Oil Futures were trading at $69.34, down $1.01 or -1.44%.
Oil prices also fell by 1% on Friday, with both Brent and WTI benchmarks on course for their first monthly decline since November. This downward trend is attributed to U.S. tariff threats and Iraq’s announcement to resume oil exports from the Kurdistan region. The Iraqi oil ministry plans to export 185,000 barrels per day (bpd) through state marketer SOMO, with expectations for increased volumes over time.
This situation raises concerns regarding Iraq’s compliance with OPEC+ production commitments, as highlighted by Harry Tchilinguirian from Onyx Capital Group. If OPEC+ postpones the return of 120,000 bpd in voluntary cuts in April, Iraq’s increased output may counteract these measures, subsequently aggravating supply pressures.
Investor sentiment has also been hindered by recently announced U.S. tariffs by President Donald Trump. Effective March 4, a 25% tariff on goods from Mexico and Canada, along with a 10% duty on Chinese imports, will be applied. Such tariff escalations present concerns regarding global demand, with Ole Hansen from Saxo Bank noting potential repercussions for growth, inflation, and crude oil consumption.
Anticipations of a slowing U.S. economy combined with possible increases in Russian oil supply, contingent upon peace negotiations in Ukraine, are inhibiting risk appetite further. Added pressures arise from unexpectedly high U.S. jobless claims and indicators of slowing economic growth in the fourth quarter.
Saudi Arabia, recognized as the largest oil exporter worldwide, may reduce its official selling prices (OSP) for April crude shipments to Asia. A Reuters survey indicates potential cuts of 20 to 65 cents per barrel for Arab Light crude, establishing prices for April at a premium of $3.25 to $3.70 per barrel against the Oman/Dubai average, a decrease from March’s $3.90 premium.
These anticipated price adjustments are indicative of slight declines in benchmark prices and weaker refining margins in Asia. Considering that China is likely to increase its imports of Russian and Iranian oil in March, demand for Saudi crude may face additional challenges.
Overall, the crude oil market is likely to experience further downward pressure. With key technical indicators suggesting that a failure to surpass the $70.59 resistance may lead sellers to target $67.06, the macroeconomic landscape characterized by heightened tariff tensions and potential rises in Iraqi and Russian oil supply points to a bearish sentiment.
Traders are advised to monitor for a weekly close above $70.40, which could indicate potential short-term support; however, the prevailing sentiment remains cautious.
In summary, light crude oil futures are currently exhibiting bearish trends due to various geopolitical and economic factors. Traders face significant resistance points that may determine the market’s direction. Key influencing elements include U.S. tariff threats, the resumption of Iraqi oil exports, and broader economic concerns. While there is a potential for short-term support, the overall market sentiment remains negative, reflecting uncertainty in supply and demand dynamics.
Original Source: www.fxempire.com
