Commodity Radar: After a 12% crash, is crude oil set for a steeper slide? 3 key indicators to watch

Crude oil prices traded in a narrow range on Wednesday ahead of a crucial OPEC+ meeting, where the cartel is expected to decide in favour of boosting oil output in August. Prices were mildly up as investors took note of positive demand indicators.

Supportive data from a private-sector survey in China showed factory activity returned to expansion in June, according to a Reuters report quoting Randall Rothenberg, a risk intelligence expert at U.S. oil brokerage Liquidity Energy.

Meanwhile, OPEC+ is expected to raise oil output by 411,000 barrels per day when it meets on Sunday, July 6.

Crude oil prices have seen significant declines due to easing tensions in the Israel-Iran conflict. The tensions had triggered a massive surge in the geopolitical premium of oil, with both Brent and WTI rising approximately 12–13% week-on-week. While Brent peaked at about $81.40, WTI reached near $77.62.

“Crude oil markets saw a sharp decline last week, with prices plunging over 12% to $65.52 per barrel, erasing the $10/bbl geopolitical risk premium that had built up during the Israel-Iran tensions,” said Naveen Mathur, Director – Commodities & Currencies at Anand Rathi Shares and Stock Brokers. He added that a surprise ceasefire agreement between the two nations calmed market fears and quickly shifted focus back to weak global fundamentals.

While OPEC+ supply hikes and clean energy trends weigh on sentiment, falling inventories and rigs may cushion the decline. All eyes are now on OPEC+, U.S. data, and China, Mathur added.
Despite a significant drop in U.S. crude inventories and tightening supplies at the Cushing hub, bearish sentiment prevailed as structural oversupply concerns resurfaced.
Mathur sees the expected increase in oil output as a setback for oil prices. It will mark the fifth consecutive monthly hike.
“While actual production has lagged behind announced targets, the signal of rising supply is weighing on sentiment. At the same time, both the IEA and EIA have slashed their 2025 global oil demand forecasts to 720,000 bpd and 800,000 bpd, respectively, citing a slowdown in consumption driven by the clean energy transition,” Mathur said.

Tailwinds

Restricting sharp fall in the prices is the continuous drawdown in the US crude oil inventories amid the summer travel demand season. Meanwhile, U.S. rig counts continued their downward trend, falling for a fourth straight month to the lowest since October 2021—an early indicator of potentially tightening future output.

Crude oil outlook

Oil prices may stay under pressure in near term as fading geopolitical risk and rising OPEC+ supply weigh on sentiment, the Anand Rathi expert opines.

Meanwhile, drawdowns in inventories, declining US rig counts, and potential demand recovery from Asia could limit downside, he added.

Technical view

1. Moving averages

MCX Crude Oil is displaying a bearish trend as it trades below the 200-Daily Moving Average (DMA) at 5,870.

2. Key support & resistance levels

The price is currently near a significant resistance level at 5,750, and failing to break above this could trigger further down side momentum. Key resistance levels are seen at 5,750, 5,870, and 6,000, while support is placed at 5,450, 5,360, and 5,280.

3. RSI

The RSI indicator continues below the 50 level, indicating sustained momentum and underlying strength.

WTI Crude Oil is approaching a crucial zone between $66.50 and $67.50, with $68.40 acting as a strong resistance level. Additional support levels are identified at $63.60, $62.80, and $60.90.

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(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)