Oil Price Analysis: Will WTI Continue Its Bullish Breakout or Face Resistance?
Global Oil Prices Surge as U.S. Drilling Rigs Rise Amid Trade Tensions and Geopolitical Risk
The oil market continues to show resilience with WTI crude oil prices moving sharply higher following a period of consolidation. As of Thursday, WTI prices surged by more than 3%, reaching $64.43 per barrel. This rally came after a previous dip in prices, with WTI continuing to find support in the $60.00 to $64.00 range. The price of oil has climbed nearly $4 from the previous Friday, supported by the ongoing geopolitical risks, particularly escalating U.S.-China trade tensions. On April 17, WTI broke above the key level of $64.05, marking a breakout that has set the stage for further upward momentum.
The latest data from Baker Hughes revealed that the total number of active drilling rigs in the United States has increased by two this week, reaching 585 rigs. While this is a positive sign for U.S. production, it remains 34 rigs lower than the same period last year. The number of oil rigs rose by one to 481, although this is still down by 30 compared to the same period last year. This slight increase in drilling rigs, along with the increase in U.S. crude oil production—rising slightly to 13.462 million barrels per day (bpd)—could indicate a stabilizing market, despite ongoing trade risks.
Despite the price gains, WTI is still trading below the breakeven point for Permian Basin players, with drilling activity in the basin remaining steady at 289 rigs—29 fewer than this time last year. The Eagle Ford rig count remained unchanged at 47 rigs, marking a decrease of 8 from last year. While drilling activity in the U.S. remains relatively stable, the oil market is facing potential headwinds in the form of geopolitical risks and trade tensions, which have the potential to add volatility to the market.
Will the U.S.-China Trade Deal Lead to a Sustainable Oil Price Rise?
One of the main drivers of the recent oil price surge is the hope for a trade deal between the United States and China. The latest data has shown that trade progress between the two global powers is providing some relief to the oil market, helping to push WTI prices higher. The positive sentiment surrounding potential trade resolution between the U.S. and China could alleviate some of the pressure on oil prices that have been building from trade tariff uncertainties. A favorable trade agreement would likely stabilize the global market and potentially reduce the risk premium that has been priced into oil for the past several months.
However, despite the optimism, risks remain high in the form of ongoing trade disputes and tariffs. The latest round of U.S. tariffs on Chinese goods, along with the retaliation from China, has created considerable uncertainty. The latest figures show that oil prices continue to see volatility as the market reacts to these geopolitical risks. If the trade talks between the U.S. and China fail to deliver, the market could face renewed pressure, potentially pushing WTI prices back down toward key support levels. The price action this week suggests that WTI is likely to test resistance levels around $65.00 to $67.00 in the short term.
The Role of Drilling Rig Counts and U.S. Production in Shaping Oil Prices
The recent increase in U.S. drilling activity, with rig counts rising to 585, suggests a potential increase in domestic production, which could weigh on oil prices if supply outpaces demand. Although WTI is supported by the ongoing geopolitical risk and expectations of global demand growth, the increase in U.S. production may counterbalance the bullish factors in the market. This trend is particularly significant given that U.S. production has been hovering just below the record level of 13.5 million bpd reached in December 2024. Any sustained increase in drilling activity could contribute to higher levels of U.S. output, potentially contributing to downward pressure on oil prices in the long run.
Additionally, WTI is also seeing a technical breakout above the 50% Fibonacci retracement level at $63.86, which has previously acted as resistance. This technical move adds fuel to the bullish momentum and suggests that further price upside could be possible if the breakout is confirmed. However, the price needs to close above $64.05 to maintain momentum and avoid a false breakout.
In terms of oil price targets, analysts suggest that the next key resistance zone for WTI lies between $65.00 and $67.00, with the potential for prices to test the $69.00 level if the market maintains its bullish trajectory. On the other hand, downside risks include the $60.00 support area, which has been holding up in recent trading sessions.
Rising Geopolitical Risks and Their Impact on the Oil Price Outlook
The geopolitical landscape remains a significant factor influencing oil prices, particularly with the trade tensions between the U.S. and China. Escalating tariffs between these two global powers could add a premium to oil prices, as traders price in the potential for supply disruptions or demand shifts. Additionally, other geopolitical factors, such as instability in the Middle East, continue to influence WTI prices.
Despite the potential for some price volatility, WTI has shown resilience, holding above key technical levels, and is poised for further gains in the short term. As WTI tests the $64.50 to $65.00 levels, the next upside target would likely be in the $67.00 range, as the market digests the impact of trade negotiations and geopolitical developments.
The Impact of Fed’s Policy on Oil Prices
The Federal Reserve’s stance on interest rates also plays a role in shaping oil prices. If the Fed opts for a more dovish policy stance in the coming months, especially in response to trade-related economic risks, it could further support oil prices, as a weaker U.S. dollar typically benefits commodities priced in dollars, including crude oil. The expectation of continued low interest rates and a dovish Fed outlook could be a positive catalyst for WTI and other oil benchmarks, especially if trade uncertainties subside.
However, should the Fed take a more hawkish stance, the impact on oil prices could be more negative. The rising U.S. yields could strengthen the dollar, which traditionally pressures oil prices by making crude more expensive for foreign buyers.
WTI Price Outlook: Bullish Momentum With Caution Ahead of Key Levels
At the time of writing, WTI is trading near the highs of the day, pushing toward $64.43 per barrel. The recent breakout above previous resistance levels suggests that oil prices could continue to trend higher in the coming days, with $65.00 being the immediate target. Longer-term, WTI faces a key resistance zone at $67.00, followed by $69.00.
However, there are still risks to the upside momentum. A failure to sustain above the breakout levels could lead to a short-term pullback toward the $63.86 level, with the next support at $60.00. The market’s next move will depend on how geopolitical factors, particularly U.S.-China trade talks, evolve in the near future.
Should You Buy, Sell, or Hold WTI Oil Now?
Given the current breakout above the $64.00 level, WTI is showing bullish signs. However, short-term fluctuations are likely as traders react to the ongoing trade risks and U.S. production data. If you’re holding WTI, now may be a good time to keep positions open, as the price targets above $65.00 seem achievable in the short term. If you’re considering buying, look for confirmation of support around $64.00 to $63.00 to enter at a better price.
In conclusion, WTI appears to be in an uptrend, but as with all oil trades, careful monitoring of the geopolitical landscape and U.S. production figures is essential to understand the market’s next move.
