Crude oil’s trajectory remained subdued, trading around $77.80, amid speculation that the Federal Reserve might hold interest rates steady. This expectation, which is based on the most recent economic indicators showing a mixed bag of consumer price increases and a decline in retail sales, suggests that the Fed will take a cautious approach to rate adjustments shortly.

The probability of a rate cut, now pegged at 52% for June by the CME FedWatch Tool, places a bearish shadow over crude oil prices. Additionally, the strength of the US dollar, hovering near three-month peaks due to sustained inflationary pressures, further complicates the outlook for oil prices, as a robust dollar typically translates to weaker commodity prices.

Middle Eastern Geopolitical Tensions and Oil Supply Concerns

The unfolding geopolitical landscape, particularly in the Middle East, introduces another layer of complexity. Recent developments, including military actions in Gaza and escalations between Israeli forces and Palestinian groups, underscore the fragile geopolitical equilibrium.

The ongoing conflict has resulted in significant casualties and has sparked concerns over a potential escalation that could disrupt oil supplies, thus exerting upward pressure on crude oil prices. The situation remains fluid, with the international community closely monitoring the potential for broader regional implications.

Market Caution Amid Holiday Trading and Geopolitical Uncertainty

Amid these developments, market participants exhibit caution, particularly with the US observing President’s Day, leading to subdued trading activity. The intertwining of the Fed’s monetary policy stance, the US dollar’s strength, and escalating Middle Eastern tensions presents a complex scenario for crude oil markets.

While economic data suggests a bearish outlook due to interest rate dynamics, geopolitical risks in key oil-producing regions could pivot market sentiment, driving volatility in crude oil prices.

Crude Oil Price Forecast: Technical Outlook

Crude oil (USOIL) experienced a slight downturn in today’s trading session, marking a 0.45% decrease to $77.79. The commodity is navigating through volatile waters, with its pivot point at $76.85. Looking ahead, resistance levels are poised at $78.74, $80.83, and $82.64, potentially capping upward movements.

Conversely, support is found at $75.51, $74.17, and $72.48, providing a cushion against further declines. Technical indicators shed light on the oil market’s dynamics.

The Relative Strength Index (RSI) at 56 hints at a moderately bullish sentiment, while the 50-day Exponential Moving Average (EMA) at $76.68 underlines a supportive trend for buyers.

The observed upward channel and the 50 EMA’s backing reinforce a bullish outlook for WTI crude oil as long as prices remain above the $76.85 level.