Market expectations for geopolitical game! Falling oil prices hold hidden implications
2025-08-29 10:54:25
In the Asian session on Friday (August 29), U.S. crude oil (WTI) fell slightly by 0.75% and is currently trading around $64.10 per barrel, as the market is worried about oversupply and the United States is pressuring India to stop importing Russian oil.
Influencing factors
Since the outbreak of the Russo-Ukrainian conflict in 2022, Russia has been subject to severe economic sanctions, which theoretically have also affected its crude oil exports to the West. Against this backdrop, India has become one of Russia's key allies, continuously increasing its oil purchases. It is estimated that India currently purchases approximately 2 million barrels per day, which accounts for about one-third of Russia's seaborne exports.
US President Trump, after threatening to punish India for purchasing discounted Russian oil, has doubled tariffs on a range of Indian imports to 50%. The measure, which took effect on Wednesday, has heightened supply concerns and weighed on WTI prices. Crude oil traders will be closely watching India's response to US pressure to halt Russian oil purchases.
According to market research, Russia launched missile and drone attacks on Ukraine on Thursday, killing at least 21 people in Kiev. Meanwhile, the Ukrainian military said it attacked two Russian oil refineries with drones overnight. The escalation of tensions in the Russia-Ukraine conflict could push up WTI prices in the short term.
Data from the U.S. Energy Information Administration (EIA) on Wednesday showed a larger-than-expected drop in crude oil inventories last week. This weekly report indicates strong demand from the world's largest crude oil consumer, which could support WTI prices. U.S. crude oil inventories fell by 2.392 million barrels in the week ending August 22, compared with a decrease of 6.014 million barrels in the previous week and the consensus estimate of a 2 million barrel drop.
Is confidence in the crude oil market recovering?
The CBOE Crude Oil Volatility Index (OVX) is currently at 31.94 points, showing a steady downward trend in recent weeks. From a technical perspective, a value around 30 points indicates that market volatility is at a moderate level.
(CBOE Crude Oil Volatility Index Chart)
As long as the index continues to decline, there are no immediate signs of risks that could trigger significant oil price fluctuations. This suggests a moderate market confidence environment with manageable risks in the short term. If this stability is maintained, recent buying pressure in the crude oil market may become more significant in subsequent trading sessions.
Technology Outlook
The overall trend is still downward. From a technical perspective, before the moving average pressure is broken, it will temporarily maintain range fluctuations.
Bearish Trend Emerging: WTI oil prices have been trending lower in recent weeks, demonstrating a gradual bearish trend. However, there are currently no clear signals confirming a new, solid upward trend. Oil prices lack a clear long-term direction and face key resistance at the 20-week exponential moving average (EMA) at 65.64, providing some support for a short-term decline.
The 14-day Relative Strength Index (RSI) line is slightly deviating from its 50-day midline and is now below it, highlighting the downward momentum and increasing the possibility of a more stable bearish trend.
(U.S. crude oil weekly chart, source: Yihuitong)
At 10:53 Beijing time, U.S. crude oil continued to trade at $64.10 per barrel.
Influencing factors
Since the outbreak of the Russo-Ukrainian conflict in 2022, Russia has been subject to severe economic sanctions, which theoretically have also affected its crude oil exports to the West. Against this backdrop, India has become one of Russia's key allies, continuously increasing its oil purchases. It is estimated that India currently purchases approximately 2 million barrels per day, which accounts for about one-third of Russia's seaborne exports.
US President Trump, after threatening to punish India for purchasing discounted Russian oil, has doubled tariffs on a range of Indian imports to 50%. The measure, which took effect on Wednesday, has heightened supply concerns and weighed on WTI prices. Crude oil traders will be closely watching India's response to US pressure to halt Russian oil purchases.
According to market research, Russia launched missile and drone attacks on Ukraine on Thursday, killing at least 21 people in Kiev. Meanwhile, the Ukrainian military said it attacked two Russian oil refineries with drones overnight. The escalation of tensions in the Russia-Ukraine conflict could push up WTI prices in the short term.
Data from the U.S. Energy Information Administration (EIA) on Wednesday showed a larger-than-expected drop in crude oil inventories last week. This weekly report indicates strong demand from the world's largest crude oil consumer, which could support WTI prices. U.S. crude oil inventories fell by 2.392 million barrels in the week ending August 22, compared with a decrease of 6.014 million barrels in the previous week and the consensus estimate of a 2 million barrel drop.
Is confidence in the crude oil market recovering?
The CBOE Crude Oil Volatility Index (OVX) is currently at 31.94 points, showing a steady downward trend in recent weeks. From a technical perspective, a value around 30 points indicates that market volatility is at a moderate level.
(CBOE Crude Oil Volatility Index Chart)
As long as the index continues to decline, there are no immediate signs of risks that could trigger significant oil price fluctuations. This suggests a moderate market confidence environment with manageable risks in the short term. If this stability is maintained, recent buying pressure in the crude oil market may become more significant in subsequent trading sessions.
Technology Outlook
The overall trend is still downward. From a technical perspective, before the moving average pressure is broken, it will temporarily maintain range fluctuations.
Bearish Trend Emerging: WTI oil prices have been trending lower in recent weeks, demonstrating a gradual bearish trend. However, there are currently no clear signals confirming a new, solid upward trend. Oil prices lack a clear long-term direction and face key resistance at the 20-week exponential moving average (EMA) at 65.64, providing some support for a short-term decline.
The 14-day Relative Strength Index (RSI) line is slightly deviating from its 50-day midline and is now below it, highlighting the downward momentum and increasing the possibility of a more stable bearish trend.
(U.S. crude oil weekly chart, source: Yihuitong)
At 10:53 Beijing time, U.S. crude oil continued to trade at $64.10 per barrel.
- Risk Warning and Disclaimer
- The market involves risk, and trading may not be suitable for all investors. This article is for reference only and does not constitute personal investment advice, nor does it take into account certain users’ specific investment objectives, financial situation, or other needs. Any investment decisions made based on this information are at your own risk.
