Light crude oil futures have declined due to tariff concerns and increased Iraqi oil exports, leading to a bearish outlook. Key resistance levels are preventing price gains, while sustained trading below critical averages may attract sellers, potentially pushing prices lower. Economic factors, including U.S. tariffs and compliance issues with OPEC+, contribute to weak market sentiment.
Light crude oil futures declined on Friday, reflecting a lack of decisiveness among traders and the potential for heightened volatility. Key resistance levels at $70.35 and $70.59 have been limiting upward progress. A decisive breakout above these thresholds could lead to a rally targeting the 50-day moving average and pivot points around $72.02 and $72.08.
Conversely, continued trading below the retracement zone and the crucial 200-day moving average may trigger significant selling pressure, driving prices toward a weekly low of $68.36. A breach of this level could indicate a deeper decline, with $67.06 identified as the next significant support level.
At 11:11 GMT, Light Crude Oil Futures were priced at $69.34, down by $1.01 or 1.44%. Oil prices fell by 1% on Friday, with Brent and WTI benchmarks anticipated to register their first monthly decline since November. This market reaction is attributed to the U.S. tariff threats alongside Iraq’s resumption of oil exports from the Kurdistan region. Iraq’s Ministry of Oil aims to export 185,000 barrels per day through SOMO, with plans for gradual volume increases.
This development raises compliance issues with Iraq’s commitments to OPEC+, as observed by Harry Tchilinguirian of Onyx Capital Group. If OPEC+ postpones the return of 120,000 barrels per day of voluntary cuts in April, increased output from Iraq might counteract these measures, intensifying supply pressures.
Investor sentiment has been further subdued by U.S. President Donald Trump’s tariff announcements, set to be effective on March 4. A 25% tariff on Mexican and Canadian imports and an additional 10% duty on Chinese goods have sparked concerns regarding global demand. Ole Hansen from Saxo Bank cautioned that such measures could adversely affect growth, inflation, and crude oil consumption.
Anticipations of a slowdown in the U.S. economy, coupled with the potential for higher Russian oil supply if peace negotiations in Ukraine advance, are also contributing to a cautious market outlook. Additionally, recent higher-than-expected U.S. jobless claims and indications of slowing economic growth during the fourth quarter are exerting further downward pressure on the market.
Saudi Arabia, the largest oil exporter globally, is predicted to slightly reduce its official selling prices for April crude shipments to Asia. Traders surveyed by Reuters expect cuts ranging from 20 to 65 cents per barrel for Arab Light crude, revising April prices to 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 reflective of marginal declines in benchmark prices and weakened refining margins across Asia. With China expected to increase imports of Russian and Iranian oil, demand for Saudi crude may face further challenges.
Overall, the crude oil market is set for additional downward pressure. Current technical indicators suggest that prices must breach the $70.59 resistance level; otherwise, sellers may drive futures toward $67.06. The broader economic context, characterized by escalated tariff tensions, potential surges in Iraqi and Russian oil supply, and diminishing demand in Asia, underlines a bearish market perception.
Traders should monitor for a weekly close above $70.40, which could signal the possibility of short-term support; however, the prevailing sentiment remains one of caution. Further detailed insights can be found in our Economic Calendar.
In conclusion, the crude oil market is experiencing notable pressure due to U.S. tariff threats and an increase in Iraqi oil exports. Resistance at critical price levels complicates the likelihood of a recovery, while sustained drops could lead to significant declines. With broader economic uncertainties and potential supply boosts from Iraq and Russia, caution among traders is advisable.
Original Source: www.fxempire.com
