This week, WTI Crude Oil prices dropped by 3.91%, extending their losses from the previous week’s 1.47% fall. However, on Friday, oil prices closed at $82.07 per barrel, recovering by 0.27%.

Crude oil prices took a tumble this week, reversing earlier gains fueled by anxieties over a potential wider conflict in the Middle East.

Initial concerns about an escalating conflict between Israel and Iran, a major OPEC producer exporting over 3 million barrels per day, had pushed prices higher.

However, after Iran’s attack on Israel proved less damaging than anticipated, and Iranian officials downplayed the situation, signaling no immediate plans for further retaliation, the geopolitical premium on oil evaporated. This significantly impacted prices as the potential for major supply disruptions diminished.

Adding to the downward pressure, strong U.S. retail sales data pointed towards a robust American economy. The US Dollar remained stable this week, despite hitting five-month highs around 106.50 in the USD Index.

Investors closely examined US inflation data, which surpassed expectations in March, boosting confidence in the economy and potentially prolonging tighter Fed policies. Odds of a June rate cut decreased to 16%, while expectations for a cut in September rose to over 65%.

With persistent inflation and a robust labor market, the Dollar’s performance mirrored consolidating US yields near multi-month highs, suggesting minimal or no rate cuts for the remainder of the year, reinforcing a “soft landing” scenario.

Fed policymakers advocated for maintaining the current restrictive stance, with a gradual approach to reaching 2% inflation, potentially adjusting rates by year-end. This sentiment shift impacted investor outlook, influencing the Greenback’s trajectory.

Further undermining the price rally was rising U.S. oil production. The Energy Information Administration (EIA) projected a significant increase in daily output from major shale regions, contributing to a more abundant global oil supply.

Additionally, reports indicated that Iran was exporting the highest amount of oil in over six years, further alleviating supply concerns.

Amplifying the bearish sentiment, the EIA’s latest Crude Oil Inventories report revealed stockpiles at their highest level in a year at the key Gulf Coast storage hub, with inventories growing by a substantial 2.74 million barrels, the highest since June 2023. This substantial build in U.S. inventories added to the perception of a well-supplied market.

Despite the de-escalation between Iran and Israel, some uncertainty lingers.  Iran’s downplaying of the situation through state media contrasts with reports of a more impactful Israeli strike on an Iranian military airbase.

The potential for future Iranian retaliation, while seemingly less immediate, creates an element of suspense in the market.

Overall, the week saw a significant shift in sentiment for crude oil. Eased geopolitical tensions, coupled with rising U.S. production and surging inventories, outweighed initial supply disruption fears. This confluence of factors led to a price correction in the global crude oil market.

WTI Crude Oil Technical Outlook

WTI Crude Oil’s trading session closed with a slight uptick, closing at $82.07, a 0.27% increase. This price movement leaves the commodity just below its pivot point of $82.24. Should it surpass this threshold, the oil price could test higher resistance levels at $84.16, $85.61, and $87.13.

Conversely, if downward pressure persists, WTI may find support at $81.24, with additional safety nets at $79.73 and $78.63 potentially halting further declines. The Relative Strength Index (RSI) at 41 suggests that WTI is neither oversold nor overbought, providing room for either direction depending on broader market influences.

The 50-day Exponential Moving Average (EMA) sits at $84.04, signalling that near-term resistance might cap bullish advances unless significant market catalysts emerge. Overall, the technical outlook indicates a bearish bias below $82.24, with the potential for reversal if it breaks above this pivotal level.