Crude oil outlook: WTI at three week highs ahead of stocks data

Oil prices have risen to test 3-week highs, with prices finding support by expectations of tightening supplies in the short term outlook, putting concerns about demand on a back burner. However, with withheld OPEC supplies set to come back, and worries about demand to linger amid the ongoing trade war, the upside could be limited for oil, especially as prices now test major resistance areas. Thus, the longer-term crude oil outlook is far from positive.

What has been supporting oil prices?

A lot of the recent oil price gains have been triggered by physical markets tightening due to the raft of US sanctions. President Trump declared a plan to hit buyers of Venezuelan crude with 25% tariffs. Venezuela’s oil shipments to places such as China, India and Western Europe could be hit as a result. This comes days after US sanctions targeting China's imports from Iran.

What factors could cap oil prices?

Despite the short-term gains, the longer term crude oil outlook remains murky, however, with more OPEC+ supplies to come online and uncertainty over demand remaining high due to Trump's tariffs and trade war.

Avoiding to Reuters, the OPEC+ is likely to stick to its plan to raise oil output for a second consecutive month in May. There is a separate plan to force some members to reduce pumping to compensate for past overproduction.

Following several delays, the OPEC+ finally agreed to raise output by 138,000 barrels per day in April. And the group is expected to raise output by a further 135,000 bpd in May, according to Reuters.

The OPEC is unwinding some of the millions of barrels per day of cuts it has had in place since 2022 to support the oil market.

However, if the group also made it clear that it could reverse the output hike decision after April if there are market imbalances. This flexibility means we probably won’t see significant oil price falls.

OPEC+ could easily fill Iranian void

While restricting Iranian oil shipments could tighten the market in the short term, Saudi Arabia and other large OPEC+ producers could easily ramp up their production to make up for lost Iranian flows.

What’s more, there is genuine hope that the Ukraine conflict could end soon after the US reached deals with Ukraine and Russia to pause attacks at sea and against energy targets.

On top of this, Trump is pushing to lift some sanctions against Moscow.

Crude stockpiles data in focus

Bringing the focus back to the short term, today will see the official release of weekly US stockpiles data from the Energy Information Administration (EIA) after the American Petroleum Institute (API) data overnight showed inventories fell by 4.6 million barrels last week compared to a decline of 1 million barrels expected.

The EIA data was expected to reveal a build of 1.5 million barrels, but in light of the API data, those expectations look unlikely to be materialised. If we do see a surprise build, however, that should send prices tumbling.

Technical crude oil outlook: WTI key levels to watch

Source: TradingView.com

WTI has enjoyed a rebound in recent weeks, bouncing from the crucial $65.00 long-term support level earlier this month after reaching oversold conditions. However, it now finds itself at a critical juncture, testing a key resistance zone in the $69.30–$70.00 range—the very region where selling pressure last emerged. 

This is a pivotal area, and with the broader bearish trend still intact, my preference remains to look for potential bearish setups rather than chasing this recovery higher. That said, should WTI manage a decisive break above the $70.00 threshold in the coming days, I would have to reconsider my short-term bearish crude oil outlook.

Indeed, a clean break above $70 could pave the way for a potential recovery towards the 200-day moving average which comes in all the way up at $72.60.

On the downside, initial support comes in at $68.50, followed by $67.00. The long-term support level of $65.00 remains the key downside target for me.

-- Written by Fawad Razaqzada, Market Analyst

Follow Fawad on Twitter @Trader_F_R