1. Trade Talks Signal Recovery in Demand
China and the United States are the two largest economies and among the biggest consumers of crude oil. Over the past year, their trade conflict slowed down manufacturing, reduced cross-border trade, and weakened demand for fuel and energy.
Now that China is signaling its willingness to restart negotiations, market sentiment has improved. Traders are anticipating a recovery in economic activity, which would naturally lead to increased oil consumption. As a result, both Brent and WTI crude prices rose shortly after the news.
2. Global Demand Sentiment Improving
The outlook for oil demand, which had been under pressure due to weak economic data, is beginning to improve. With the possibility of fewer trade restrictions, industrial output and transport activity could rise again—both major consumers of crude.
China plays a central role in this scenario. As the world’s largest importer of oil, even a modest uptick in its economic growth can lift global demand forecasts. This is why oil markets tend to respond strongly to any signs of progress or stability in China’s economy.
3. Geopolitical Risks and Supply Constraints
While demand hopes are rising, supply risks are also becoming more prominent. The United States has indicated it may impose secondary sanctions on countries that continue to import oil from Iran. If enforced, these measures could reduce Iranian oil exports and tighten global supply.
OPEC+ is another key factor. The group is scheduled to meet on May 5 to decide whether to adjust its output levels. Some member countries are pushing to increase production to take advantage of current price levels, while others, including Saudi Arabia, are in favor of keeping production cuts in place. The outcome of this meeting will significantly influence near-term supply levels.
4. U.S. Inventory Levels and Shale Output
Recent data from the U.S. Energy Information Administration (EIA) shows a slight drawdown in crude inventories, indicating that demand may be outpacing supply in the short term.
Additionally, U.S. shale oil production, which had been expanding aggressively over the past few years, is showing signs of slowing down. A more balanced or reduced rate of production helps support prices, especially when global demand is expected to rise.
On the technical front, crude oil is showing signs of a recovery after a sharp sell-off. Prices have rebounded nearly 200 points from the key support zone near 4800, fueled by both news-driven sentiment and the technical strength of that support level.
However, caution is advised if prices begin to test the 4700 level again. A breakdown below this zone could trigger further downside momentum, making it a critical support area to monitor. As long as 4700 holds, the market may continue to consolidate or recover in the near term. If ₹4700 is breached, we could see further downside momentum, with prices potentially dropping to ₹4500, driven by panic selling.
The price range between 4900 and 4700 is currently considered a high-risk sell zone, where false breakouts and whipsaws are possible. Selling within this band requires caution, as momentum could shift quickly.
On the upside, the immediate resistance is seen around ₹5150. If prices sustain above this level, it may trigger further bullish momentum. A breakout above ₹5150 could open the path toward the next key resistance at ₹5350, where some profit-booking or consolidation might occur.
Conclusion:
Crude oil is currently at a pivotal point, shaped by both improving global sentiment and critical technical levels. On the fundamental side, the renewed optimism from China–U.S. trade talks and geopolitical factors such as supply constraints are driving a more stable demand outlook. However, risks remain on the supply side, with sanctions on Iranian exports and OPEC+ decisions potentially tightening the global oil supply.
From a technical perspective, crude oil has bounced strongly from the ₹4800 support zone, showing healthy buyer interest. ₹4700 remains a crucial support level, and as long as it holds, the downside appears limited. The range between ₹4700 and ₹4900 is volatile, so caution is advised when trading within this zone. A break above ₹5150 could signal further upside potential, with the next target at ₹5350.
Until then, Happy Trading!
Commodity Samachar Securities
We Decode the Language of the Markets
Also Read: Oil Prices Tumble – On Track for Biggest Monthly Fall in Three Years , Highest GST Ever! Will This Boost the Bulls?
Recommended Read: India’s Semiconductor Surge: Powering the Future of Electronics!
Chat with RM
