A week of turmoil for crude oil: trapped in the curse of a "news-driven market," when will the next black swan event arrive?
2026-01-16 20:09:42
On Friday (January 16), Brent crude oil traded around $64.50 during the European session, with a daily increase of approximately 1.2%. Over the past few trading days, oil prices have exhibited a typical "geopolitical-driven" trend. Initially, driven by news of heightened tensions in the Middle East, oil prices rose for five consecutive days, and market sentiment quickly intensified. Traders bet heavily on a potential escalation of the conflict, which could impact global energy supplies, causing risk premiums to rise rapidly.
However, this positive trend was short-lived. On Wednesday, the US signaled a willingness to avoid immediate military escalation, a move that quickly dampened the previously accumulated premium, causing oil prices to fall. But the story didn't end there. Following this, media reports indicated that the US military was mobilizing air, land, and sea forces towards the Middle East, with the deployment expected to take about a week. This "week" window became a source of market anxiety—the longer the timeframe, the greater the uncertainty. Especially near the weekend, some funds, for risk aversion, would reduce their positions or hedge, leading to volatility and premiums in oil prices during this news vacuum. More subtly, Israeli Prime Minister Netanyahu reportedly spoke with the US President, hoping the US would postpone its actions to allow time for possible Iranian action. Even unconfirmed information like this is traded in advance by the market; this is the unique logic of geopolitical risk premiums: it doesn't require the event to actually occur; as long as the "possibility" exists, the price will react.
Despite repeated geopolitical turmoil affecting the market, analysts point out that the lack of substantial supply disruptions is the core factor limiting sustained oil price increases. In particular, the Strait of Hormuz, the world's most critical oil transport chokepoint, has remained unaffected. This strait carries approximately 20 million barrels of crude oil daily; a blockade or attack on it would immediately trigger a global energy crisis-level price reassessment. Therefore, as long as this "threshold variable" remains stable, the market's acceptance of risk premiums is limited, and prices will ultimately revert to supply and demand fundamentals.
The current fundamentals are not optimistic. The macroeconomic environment is weak, global demand expectations are under pressure, refinery operating rates have not shown a significant rebound, and inventory levels have not signaled strong tightness. These factors collectively create a downward pull, creating a tug-of-war with the upward push from geopolitical factors. It is worth noting that although absolute prices have fallen from their highs, the time spread of near-month contracts has remained relatively firm, indicating that there is still some tightness in the spot market. This combination of "strong structure, weak price" suggests that deliverable crude oil resources remain tight in the short term, supporting near-term prices; however, in the medium to long term, the market is not optimistic about future supply and demand balance, therefore, long-term contracts are unlikely to improve.
From a technical chart perspective, Brent crude oil is currently in a critical correction phase. The daily chart shows that after reaching $66.79, the recent rally encountered resistance and retreated, currently consolidating around $64.50. Significant resistance lies at the upper highs, and a breakout will be difficult without new evidence of geopolitical escalation or tightening in the spot market. The $63.50 level is considered a short-term risk control point; a break below this level could trigger further profit-taking by trend-following funds, potentially leading to an accelerated decline. Further down, $58.69 represents a crucial medium-term support area, corresponding to a recent low and possessing strong psychological and technical significance.
In terms of indicators, the MACD DIFF is 0.66, DEA is 0.20, and MACD histogram is 0.91. Although still in the bullish zone, the momentum has shown signs of slowing down, indicating that the upward momentum is weakening. The RSI (14) is running around 58.48, which is in the neutral to strong zone. It has neither entered the overbought zone nor shown obvious weakness, indicating that the market is in the digestion period after the news-driven event. At this time, the price depends more on external event catalysts than on the continuation of the internal trend, showing typical "high-level oscillation" characteristics.
Meanwhile, cross-product correlation also provided some sentiment support for oil prices. The European natural gas market rose over 4.2% in the previous trading day, with prices returning to above €33/MWh. This was mainly due to expectations of a cold snap at the end of the month and low inventory levels—current storage rates are less than 52%, far below the five-year average of 67%. Low inventory levels amplified the marginal impact of weather disturbances, prompting investment funds to significantly cover short positions, with net short positions decreasing from 92.76 TWh in mid-December to 55.14 TWh. When natural gas experiences a short squeeze, risk appetite across the entire energy sector is activated, indirectly boosting sentiment in the crude oil market. However, this support is more reflected in increased volatility than a trend-driven rise, making it difficult to drive oil prices independently.
In summary, Brent crude oil is currently caught in a double bind of geopolitical risks and bearish fundamentals. If no new escalation of conflict or evidence of shipping disruptions emerges in the coming days, the risk premium is likely to continue to decline, and oil prices will be more likely to fall back after a rebound. Market focus will shift back to traditional variables, including the global oil demand outlook, the pace of OPEC+ supply recovery, and changes in commercial inventories. However, the resilience of near-month time spreads suggests that the spot market is not entirely loose and is not yet sufficient to allow prices to break through key support levels directly.
Therefore, the market is more likely to exhibit a pattern of "resistance above, support below, and rapid entry and exit within a range based on news." $66.79 can be considered the upper resistance level to observe; a breakout requires stronger catalysts. $63.50 is the short-term support level; a breach of this level could lead to a rapid decline due to a combination of sentiment and position sizing. Analysts believe that only when there are verifiable disruptions to shipping or damage to facilities at key points such as the Strait of Hormuz will a systemic upward correction in risk premiums be restarted. Until then, every geopolitical development will become a new starting point for the battle between bulls and bears.
However, this positive trend was short-lived. On Wednesday, the US signaled a willingness to avoid immediate military escalation, a move that quickly dampened the previously accumulated premium, causing oil prices to fall. But the story didn't end there. Following this, media reports indicated that the US military was mobilizing air, land, and sea forces towards the Middle East, with the deployment expected to take about a week. This "week" window became a source of market anxiety—the longer the timeframe, the greater the uncertainty. Especially near the weekend, some funds, for risk aversion, would reduce their positions or hedge, leading to volatility and premiums in oil prices during this news vacuum. More subtly, Israeli Prime Minister Netanyahu reportedly spoke with the US President, hoping the US would postpone its actions to allow time for possible Iranian action. Even unconfirmed information like this is traded in advance by the market; this is the unique logic of geopolitical risk premiums: it doesn't require the event to actually occur; as long as the "possibility" exists, the price will react.
Key support levels remained unaffected, but fundamentals continued to drag the economy down.
Despite repeated geopolitical turmoil affecting the market, analysts point out that the lack of substantial supply disruptions is the core factor limiting sustained oil price increases. In particular, the Strait of Hormuz, the world's most critical oil transport chokepoint, has remained unaffected. This strait carries approximately 20 million barrels of crude oil daily; a blockade or attack on it would immediately trigger a global energy crisis-level price reassessment. Therefore, as long as this "threshold variable" remains stable, the market's acceptance of risk premiums is limited, and prices will ultimately revert to supply and demand fundamentals.
The current fundamentals are not optimistic. The macroeconomic environment is weak, global demand expectations are under pressure, refinery operating rates have not shown a significant rebound, and inventory levels have not signaled strong tightness. These factors collectively create a downward pull, creating a tug-of-war with the upward push from geopolitical factors. It is worth noting that although absolute prices have fallen from their highs, the time spread of near-month contracts has remained relatively firm, indicating that there is still some tightness in the spot market. This combination of "strong structure, weak price" suggests that deliverable crude oil resources remain tight in the short term, supporting near-term prices; however, in the medium to long term, the market is not optimistic about future supply and demand balance, therefore, long-term contracts are unlikely to improve.
Technically, the market has entered a period of high-level consolidation, leading to intensified competition among investors.
From a technical chart perspective, Brent crude oil is currently in a critical correction phase. The daily chart shows that after reaching $66.79, the recent rally encountered resistance and retreated, currently consolidating around $64.50. Significant resistance lies at the upper highs, and a breakout will be difficult without new evidence of geopolitical escalation or tightening in the spot market. The $63.50 level is considered a short-term risk control point; a break below this level could trigger further profit-taking by trend-following funds, potentially leading to an accelerated decline. Further down, $58.69 represents a crucial medium-term support area, corresponding to a recent low and possessing strong psychological and technical significance.
In terms of indicators, the MACD DIFF is 0.66, DEA is 0.20, and MACD histogram is 0.91. Although still in the bullish zone, the momentum has shown signs of slowing down, indicating that the upward momentum is weakening. The RSI (14) is running around 58.48, which is in the neutral to strong zone. It has neither entered the overbought zone nor shown obvious weakness, indicating that the market is in the digestion period after the news-driven event. At this time, the price depends more on external event catalysts than on the continuation of the internal trend, showing typical "high-level oscillation" characteristics.
Meanwhile, cross-product correlation also provided some sentiment support for oil prices. The European natural gas market rose over 4.2% in the previous trading day, with prices returning to above €33/MWh. This was mainly due to expectations of a cold snap at the end of the month and low inventory levels—current storage rates are less than 52%, far below the five-year average of 67%. Low inventory levels amplified the marginal impact of weather disturbances, prompting investment funds to significantly cover short positions, with net short positions decreasing from 92.76 TWh in mid-December to 55.14 TWh. When natural gas experiences a short squeeze, risk appetite across the entire energy sector is activated, indirectly boosting sentiment in the crude oil market. However, this support is more reflected in increased volatility than a trend-driven rise, making it difficult to drive oil prices independently.
Market Outlook: Upside pressure and downside support; news-driven factors will be key.
In summary, Brent crude oil is currently caught in a double bind of geopolitical risks and bearish fundamentals. If no new escalation of conflict or evidence of shipping disruptions emerges in the coming days, the risk premium is likely to continue to decline, and oil prices will be more likely to fall back after a rebound. Market focus will shift back to traditional variables, including the global oil demand outlook, the pace of OPEC+ supply recovery, and changes in commercial inventories. However, the resilience of near-month time spreads suggests that the spot market is not entirely loose and is not yet sufficient to allow prices to break through key support levels directly.
Therefore, the market is more likely to exhibit a pattern of "resistance above, support below, and rapid entry and exit within a range based on news." $66.79 can be considered the upper resistance level to observe; a breakout requires stronger catalysts. $63.50 is the short-term support level; a breach of this level could lead to a rapid decline due to a combination of sentiment and position sizing. Analysts believe that only when there are verifiable disruptions to shipping or damage to facilities at key points such as the Strait of Hormuz will a systemic upward correction in risk premiums be restarted. Until then, every geopolitical development will become a new starting point for the battle between bulls and bears.
- 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.
