Is crude oil forming a bottom or just experiencing a bounce?
Crude oil closed 2.38% higher on Friday, and is trading 1.4% higher Monday morning, benefiting from weekend tariff exemptions. Despite this short-term bounce, oil continues to fluctuate following its recent breakdown below key long-term support of $65-66. This price action suggests we're seeing either a consolidation or an upward correction, rather than the start of a new uptrend.
For oil markets specifically, these developments are bearish:
- The market is experiencing some relief after the White House announced electronics would be temporarily exempted from steep reciprocal tariffs on China.
- Indirect weekend talks between the US and Iran were described as constructive, potentially reducing sanction risks affecting the oil market.
- Growing fears of a global recession that could significantly reduce oil demand.
Conclusion
Crude oil is showing a modest bounce following weekend tariff exemptions, but remains technically weak after breaking down below the important support level of $65-66 in early April
The recent escalation of tariffs between the U.S. and China creates significant uncertainty for global economic growth and, by extension, oil demand.
For now, my short-term outlook is neutral.
I think that no positions are justified from the risk/reward point of view.
Here’s the breakdown:
- Crude oil closed 2.38% higher on Friday and is up an additional 1.4% in early Monday trading.
- The medium-term outlook appears bearish following the technical damage, despite the short-term bounce.
- In my opinion, the short-term outlook is neutral.
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Thank you.
Paul Rejczak,
Stock Trading Strategist