Crude Oil Trading Alert: Geopolitical tensions push up short-term oil prices; US crude oil enters a period of divergence following EIA's downward revision of its medium-term outlook.
2026-01-14 09:31:28
On Wednesday during Asian trading hours, West Texas Intermediate (WTI) crude oil prices traded near $60.70 per barrel, hitting a near two-month high. The main driver of the price rebound was renewed geopolitical tensions in the Middle East, with market concerns about potential supply disruptions clearly intensifying.
Currently, the situation in Iran remains the core focus of the oil market. As instability escalates within Iran and rhetoric hardens between Tehran and Washington/Tel Aviv, investors have rapidly increased their pricing of crude oil supply risks.
US President Trump's proposal to impose an additional 25% tariff on countries doing business with Iran has further reinforced market risk premiums, even though the impact on actual oil flows remains uncertain.
Several analysts point out that at the current stage, the oil market is significantly more sensitive to geopolitical risks than to short-term supply and demand fundamentals. Institutions generally believe that against the backdrop of relatively robust global crude oil demand, regional instability and political rhetoric have become the core variables driving price fluctuations.
However, from a medium-term perspective, fundamentals continue to constrain oil prices. The U.S. Energy Information Administration (EIA), in its latest Short-Term Energy Outlook report, indicated that U.S. crude oil production is projected to decline after reaching a record high of approximately 13.6 million barrels per day in 2025.
The EIA forecasts that U.S. production will decline by less than 1% year-on-year in 2026, but the decline will widen to about 2% in 2027. The report argues that as oil prices continue to fall, drilling activity will slow at a faster rate than drilling productivity increases, thereby driving down overall crude oil production.
Regarding price assumptions, the EIA projects that WTI crude oil prices will average around $52 per barrel in 2026 and further decline to $50 per barrel in 2027, significantly lower than the average of around $65 per barrel in 2025. This reflects its assessment that global supply will be relatively loose and inventory pressure will increase in the coming years.
Furthermore, potential new supply also limited further upside for oil prices. The market anticipates a possible temporary return of Venezuelan crude oil to the international market, with some international commodity traders expected to provide logistical support for its export recovery, adding uncertainty to the medium-term supply side of the oil market.
From a daily chart perspective, WTI has recently experienced a significant rebound, with prices consistently rising above the 5-day and 10-day moving averages. The short-term moving averages are showing an upward divergence, indicating that bullish momentum remains dominant.
Oil prices have now returned above the $60 mark, which is also the upper limit of the previous trading range. In terms of indicators, the daily Relative Strength Index (RSI) has risen to around 60, not yet entering a clearly overbought zone, suggesting that upward momentum still has room to continue, but further upward movement may face consolidation.
If the RSI continues to approach 70, the risk of chasing highs in the short term will increase significantly. From a resistance perspective, the $61.50-$62.00 range is a dense area of highs over the past two months and a key resistance level in the previous downtrend. If it cannot be effectively broken, oil prices may fall back into the range for consolidation.
Support is seen around $59.00; a break below this level could disrupt the short-term rebound structure and lead to a retest of the $57.50 support level. Overall, the daily chart shows WTI is still in a rebound channel, but it is gradually approaching a technical resistance zone, making short-term consolidation at higher levels more likely than a sustained upward trend.
Editor's Note:
The current WTI price stabilizing above $60 reflects more the return of geopolitical risk premiums than a fundamental improvement in supply and demand. EIA forecasts for oil prices and production in 2026-2027 indicate that the low oil price environment is gradually weakening the momentum for increased US crude oil production, but this process is relatively mild and unlikely to quickly reverse the global supply-demand imbalance.
From a daily chart perspective, oil prices may still have some upward momentum in the short term, but the risk-reward ratio for going long is decreasing near key resistance levels. The market needs to be wary of the risk of a technical correction after the market sentiment cools down.
Currently, the situation in Iran remains the core focus of the oil market. As instability escalates within Iran and rhetoric hardens between Tehran and Washington/Tel Aviv, investors have rapidly increased their pricing of crude oil supply risks.
US President Trump's proposal to impose an additional 25% tariff on countries doing business with Iran has further reinforced market risk premiums, even though the impact on actual oil flows remains uncertain.
Several analysts point out that at the current stage, the oil market is significantly more sensitive to geopolitical risks than to short-term supply and demand fundamentals. Institutions generally believe that against the backdrop of relatively robust global crude oil demand, regional instability and political rhetoric have become the core variables driving price fluctuations.
However, from a medium-term perspective, fundamentals continue to constrain oil prices. The U.S. Energy Information Administration (EIA), in its latest Short-Term Energy Outlook report, indicated that U.S. crude oil production is projected to decline after reaching a record high of approximately 13.6 million barrels per day in 2025.
The EIA forecasts that U.S. production will decline by less than 1% year-on-year in 2026, but the decline will widen to about 2% in 2027. The report argues that as oil prices continue to fall, drilling activity will slow at a faster rate than drilling productivity increases, thereby driving down overall crude oil production.
Regarding price assumptions, the EIA projects that WTI crude oil prices will average around $52 per barrel in 2026 and further decline to $50 per barrel in 2027, significantly lower than the average of around $65 per barrel in 2025. This reflects its assessment that global supply will be relatively loose and inventory pressure will increase in the coming years.
Furthermore, potential new supply also limited further upside for oil prices. The market anticipates a possible temporary return of Venezuelan crude oil to the international market, with some international commodity traders expected to provide logistical support for its export recovery, adding uncertainty to the medium-term supply side of the oil market.
From a daily chart perspective, WTI has recently experienced a significant rebound, with prices consistently rising above the 5-day and 10-day moving averages. The short-term moving averages are showing an upward divergence, indicating that bullish momentum remains dominant.
Oil prices have now returned above the $60 mark, which is also the upper limit of the previous trading range. In terms of indicators, the daily Relative Strength Index (RSI) has risen to around 60, not yet entering a clearly overbought zone, suggesting that upward momentum still has room to continue, but further upward movement may face consolidation.
If the RSI continues to approach 70, the risk of chasing highs in the short term will increase significantly. From a resistance perspective, the $61.50-$62.00 range is a dense area of highs over the past two months and a key resistance level in the previous downtrend. If it cannot be effectively broken, oil prices may fall back into the range for consolidation.
Support is seen around $59.00; a break below this level could disrupt the short-term rebound structure and lead to a retest of the $57.50 support level. Overall, the daily chart shows WTI is still in a rebound channel, but it is gradually approaching a technical resistance zone, making short-term consolidation at higher levels more likely than a sustained upward trend.
Editor's Note:
The current WTI price stabilizing above $60 reflects more the return of geopolitical risk premiums than a fundamental improvement in supply and demand. EIA forecasts for oil prices and production in 2026-2027 indicate that the low oil price environment is gradually weakening the momentum for increased US crude oil production, but this process is relatively mild and unlikely to quickly reverse the global supply-demand imbalance.
From a daily chart perspective, oil prices may still have some upward momentum in the short term, but the risk-reward ratio for going long is decreasing near key resistance levels. The market needs to be wary of the risk of a technical correction after the market sentiment cools down.
- 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.
