Light sweet crude oil futures fell over 1% during European trading on Monday (October 27), pressured by bearish technical signals and improving geopolitical sentiment. West Texas Intermediate (WTI) crude failed to break above the 61.8% Fibonacci level at $62.41 and subsequently fell below the 50-day moving average resistance at $62.17, opening the way for further declines. Traders are currently targeting the next downside target at the correction range between $59.94 and $58.41.



Last week's rebound pushed futures close to a breakout level, but the failure to break through key resistance has stalled bullish momentum. If WTI crude oil can rebound and re-enter its moving averages, the market may return to the recent high of $62.59 and possibly test the long-term 50% retracement level of $63.74.

US-China trade deal framework eases demand concerns

The broader context also weighed on crude oil sentiment. The US and China reached a preliminary trade deal, alleviating concerns about demand contraction due to the prolonged economic conflict. US Treasury Secretary Scott Bessent confirmed that the two sides had developed a "substantive framework" to avoid the implementation of 100% tariffs and temporarily suspend China's export restrictions on rare earth elements.

The easing of tensions has reduced the urgency to find alternative supply routes and purchase discounted Russian crude oil. However, analysts warn that if sanctions against Russia fail to significantly curb its crude oil exports, oversupply could re-emerge. Haitong Securities notes that weak enforcement of sanctions could lead to Russia increasing discounts and deploying a "shadow fleet," undermining the sanctions' effectiveness.

OPEC's internal divisions and Iraqi production in focus

Meanwhile, Iraq's oil minister stated that the country is in negotiations regarding its OPEC production quota. Despite Iraq's crude oil production capacity of 5.5 million barrels per day (bpd), its current OPEC quota is 4.4 million bpd. As OPEC's largest over-producer, Iraq has submitted a production cut plan after exceeding agreed production levels earlier this year.

Monday's announcement underscored the fragile balance within OPEC as it pivots to regain market share. Despite a recent fire at Iraq's Zubair oilfield that damaged some pipeline infrastructure, the oil ministry confirmed that crude oil exports remained stable at 3.6 million barrels per day (bpd). Furthermore, crude oil flows from the Kurdish region have rebounded to a high of 200,000 bpd following the resumption of an export agreement with Turkey.

Short-term oil price forecast: bearish outlook


(WTI crude oil daily chart source: Yihuitong)

The short-term outlook for oil prices is bearish as West Texas Intermediate (WTI) crude oil hits resistance at a major technical level and global demand concerns ease following progress in US-China trade.

Unless West Texas Intermediate (WTI) crude oil re-enters its 50-day moving average, the path of least resistance for oil prices remains further down, with traders currently targeting the next downside target at the $59.94 to $58.41 retracement range.