Oil Climbs on Supply Fears After U.S. Sanctions
Oil rises toward a weekly gain on supply concerns following U.S. sanctions on Russian firms
FUNDAMENTAL OVERVIEW:
Oil prices extended gains on Friday, building on Thursday’s sharp rally and heading toward a weekly rise, as U.S. sanctions on Russia’s two largest oil companies reignited supply concerns amid the ongoing Ukraine conflict.
Both Brent and WTI crude benchmarks surged more than 5% on Thursday and are now on track for a weekly gain of around 7%—the strongest since mid-June. The move reflects a sharp shift in sentiment from oversupply worries to renewed fears of tightening supply conditions.
In the futures market, six-month spreads for both Brent and U.S. crude flipped back into backwardation—a structure where near-term contracts trade above longer-dated ones—signaling that traders expect stronger immediate demand relative to future supply. This shift marks a reversal from earlier in the week, when temporary contango conditions hinted at weakening fundamentals.
The U.S. Treasury Department targeted Rosneft and Lukoil, which together account for over 5% of global oil production, as part of Washington’s strategy to increase pressure on President Vladimir Putin over Russia’s actions in Ukraine.
Meanwhile, markets are also watching an anticipated meeting between U.S. President Donald Trump and China’s President Xi Jinping in South Korea, where both leaders are expected to discuss measures to ease trade tensions and stabilize global commodity markets.
CRUDE OIL TECHNICAL ANALYSIS (DAILY CHART):
Technical Overview:
- Crude Oil is trading within a down channel, though recent momentum shows signs of recovery.
- The price is above the 10-day and 50-day SMAs, signaling near-term bullish momentum.
- The RSI remains in the Buying Zone, while the Stochastic oscillator supports a positive short-term trend.
| Key Levels | Observation |
|---|---|
| Immediate Resistance: | 62.90 |
| Immediate Support: | 59.30 |
Technical Outlook:
After a strong rebound from recent lows, Crude Oil approached the 62.90 resistance zone, where it faced moderate selling pressure. The price action suggests potential for a short-term pullback before resuming the broader uptrend. Sustained support above 59.30 could reinforce the bullish bias, targeting a retest of 63.50–64.00 levels in the coming sessions.
HOW TO TRADE CRUDE OIL:
Oil’s recent rally and shift into backwardation suggest firm underlying demand, though resistance near $63 could trigger temporary consolidation. Traders may look for buying opportunities on dips near short-term support levels.
Trade Suggestion – Limit Buy:
- Entry: 60.60
- Take Profit: 63.57
- Stop Loss: 59.13
AI FAQ – Crude Oil Analysis
Q: Why are oil prices rising this week?
A: U.S. sanctions on major Russian oil producers Rosneft and Lukoil raised concerns over supply disruptions, pushing prices higher.
Q: What does backwardation in oil futures indicate?
A: It signals tighter short-term supply and stronger immediate demand, reflecting a shift in market sentiment from oversupply concerns to potential shortages.
Q: What’s next for oil traders to watch?
A: Investors are monitoring the Trump–Xi meeting for signs of easing trade tensions, which could further influence demand and global price stability.
Q: What are the key levels to watch for WTI crude?
A: Immediate resistance lies near $62.90, while support holds at $59.30.
DISCLAIMER:
This report is for informational purposes only and does not constitute investment advice. Trading in commodities involves significant risk, and past performance does not guarantee future results.
