Market Minute: Oil Markets Primed for Another Bull Run?
Oil markets have declined over the past several months due to concerns about global economic growth, the impact of tariffs on consumers, and the resumption of production increases from OPEC+ nations starting in April. However, is this move oversold? While the fundamental case for oil remains bearish, there are several positive indicators worth considering in the coming months.
One key factor is seasonality. As spring begins, several events typically help stabilize prices. Refiners prepare for the summer driving season, which requires a transition to a different gasoline blend. This "summer gas" blend, designed to reduce evaporation, involves higher production costs. Additionally, this seasonal shift often coincides with refinery maintenance, which affects production capacity.
This impact is reflected in the Utilization Rate reported in the weekly EIA report, which measures refinery inputs relative to capacity. A lower utilization rate generally means reduced fuel supply, which can act as a price stabilizer. Recently, we have already observed a decline in utilization rates, signaling tighter supply in the market.
Petroleum demand typically rises in late spring and summer due to increased gasoline consumption, heightened freight activity, and greater airline fuel usage. However, the market is currently discounting this seasonal boost due to weak economic data—particularly consumer sentiment indicators like the University of Michigan survey released last Friday.
From a technical perspective, crude oil is approaching a critical support level. The $65 level for WTI Crude is widely regarded as a crucial threshold by industry experts. A break below this level could indicate further economic weakness, particularly in the United States.
However, technical indicators suggest potential bullish momentum. The Stochastic Oscillator is setting up for a possible bullish crossover on the weekly chart, with the 20-week Simple Moving Average (SMA)—currently around $70.80—acting as the first major resistance level. A breakout above this resistance could trigger a short-covering rally among Managed Money shorts, potentially pushing prices up to $74.50, representing a 10% increase from current levels.
While oil markets are facing bearish fundamentals, seasonal factors and technical support levels suggest that prices may find stability—or even rally—in the coming months. Whether the market can sustain a bullish run will depend on evolving economic data and the strength of key technical indicators.
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