Crude oil trading alert: Declining inventories coupled with a weakening dollar drive oil prices higher in a volatile upward trend.
2026-01-29 09:39:47
On Thursday during Asian trading hours, US crude oil continued to rise, trading around $63.70 per barrel. International crude oil prices have strengthened significantly recently, with WTI crude oil rising to a four-month high, primarily driven by renewed geopolitical tensions.
US President Trump publicly warned Iran that he would take stronger action if the issues could not be resolved through negotiations, and urged Iran to return to the negotiating table as soon as possible. This statement quickly triggered market concerns about the stability of Middle Eastern oil supplies, and geopolitical risk premiums returned to the oil pricing system.
Against the backdrop of a highly sensitive situation in the Middle East, Iran, as a major oil producer, has its exports and related shipping security remaining a focus of market attention. Any potential escalation of conflict could affect the stability of the crude oil supply chain, especially near key passages such as the Strait of Hormuz.
This is why, even though the market had previously widely anticipated a potential supply glut in the second half of 2025, risk sentiment has still driven crude oil futures to remain strong since the beginning of the year, with a cumulative increase of over 10% this month. The premium of call options relative to put options has remained at a relatively high level, reflecting a significant increase in investors' demand for hedging against the upside risks to oil prices.
Following Trump's remarks, WTI futures prices surged, reaching their highest level since the end of September last year. However, oil prices subsequently retreated slightly from their highs.
The Iranian mission to the United Nations stated that it is prepared to engage in dialogue based on mutual respect and shared interests, but emphasized that it will respond to external pressure in an "unprecedented manner" if forced to do so. This "soft-yet-hard" statement has somewhat eased market concerns about a short-term escalation of conflict, temporarily slowing the rise in oil prices.
Meanwhile, the macroeconomic and financial environment constrained oil prices. US Treasury Secretary Bessant reiterated the US's continued commitment to a "strong dollar" policy and denied any intention to intervene in the foreign exchange market, causing the dollar index to rebound. A stronger dollar reduced the attractiveness of dollar-denominated commodities, putting selling pressure on crude oil at its high levels and limiting short-term gains.
From a fundamental perspective, the latest inventory data released by the United States shows a clear divergence. The decline in crude oil inventories indicates a temporary improvement in the supply-demand relationship for crude oil, while the continued accumulation of refined product inventories reflects ongoing pressure on end-user demand.
Data shows that in the week ending January 23, U.S. crude oil inventories, including those in the Strategic Petroleum Reserve, declined slightly, while commercial crude oil inventories, excluding the Strategic Petroleum Reserve, saw a more significant drop, exceeding market expectations.
This change provided real support for oil prices. However, at the same time, both gasoline and distillate fuel inventories increased, with gasoline inventories reaching their highest level since 2020 and distillate fuel inventories also showing a relatively high year-on-year increase.
Furthermore, refinery capacity utilization has declined significantly, indicating that refineries are becoming more cautious given the uncertain outlook for refined product demand. This means that current oil price increases are more dependent on supply-side factors and risk premiums, while improvements on the demand side have not yet been consistently confirmed.
From the daily chart, WTI crude oil is maintaining an overall upward channel in the medium term, with prices breaking through the upper edge of the previous trading range, indicating a significant increase in bullish momentum. On the daily chart, oil prices have effectively risen above multiple key moving averages, with short-term and medium-term moving averages showing a bullish alignment, making the technical pattern quite favorable for the bulls.
In terms of momentum indicators, the daily RSI remains in the strong range, but there has been no extreme overbought signal yet, indicating that the bullish momentum still dominates. However, the room for further upward movement in the short term may gradually narrow, and we need to be wary of increased volatility at high levels.
Observing the volume and price structure, the recent surge in volume followed by a stabilization in trading momentum suggests that the market is awaiting new driving factors. Regarding key price levels, the area around $63 has become a significant short-term support zone. If the price can continue to hold above this level, WTI is expected to continue its upward movement, potentially testing the psychological barrier of $65.
Conversely, if geopolitical risks ease or the US dollar strengthens further, and oil prices fall below $63, they may retest the previous breakout area. Attention should be paid to the effectiveness of the technical support around $61.50.
Overall, the WTI daily chart structure remains bullish, but it has entered a sensitive high-level range. Future price movements will heavily depend on whether geopolitical tensions escalate further and changes in the macroeconomic and financial environment. As long as the trend remains intact, the bulls retain control, but those chasing highs in the short term should be wary of the risk of a pullback.
Editor's Note:
From the current perspective, the rise in oil prices is more due to the rapid return of geopolitical risk premiums than to a substantial shortage in fundamentals. While declining crude oil inventories provide support for prices, the continued rise in gasoline and distillate fuel inventories, coupled with a decline in refinery operating rates, indicates that concerns remain regarding end-user demand.
Against the backdrop of a rebounding US dollar and lingering expectations of oversupply, oil prices may maintain a high level of fluctuation in the short term, with the future direction still highly dependent on the evolution of the situation in the Middle East and changes in the macro-financial environment.
US President Trump publicly warned Iran that he would take stronger action if the issues could not be resolved through negotiations, and urged Iran to return to the negotiating table as soon as possible. This statement quickly triggered market concerns about the stability of Middle Eastern oil supplies, and geopolitical risk premiums returned to the oil pricing system.
Against the backdrop of a highly sensitive situation in the Middle East, Iran, as a major oil producer, has its exports and related shipping security remaining a focus of market attention. Any potential escalation of conflict could affect the stability of the crude oil supply chain, especially near key passages such as the Strait of Hormuz.
This is why, even though the market had previously widely anticipated a potential supply glut in the second half of 2025, risk sentiment has still driven crude oil futures to remain strong since the beginning of the year, with a cumulative increase of over 10% this month. The premium of call options relative to put options has remained at a relatively high level, reflecting a significant increase in investors' demand for hedging against the upside risks to oil prices.
Following Trump's remarks, WTI futures prices surged, reaching their highest level since the end of September last year. However, oil prices subsequently retreated slightly from their highs.
The Iranian mission to the United Nations stated that it is prepared to engage in dialogue based on mutual respect and shared interests, but emphasized that it will respond to external pressure in an "unprecedented manner" if forced to do so. This "soft-yet-hard" statement has somewhat eased market concerns about a short-term escalation of conflict, temporarily slowing the rise in oil prices.
Meanwhile, the macroeconomic and financial environment constrained oil prices. US Treasury Secretary Bessant reiterated the US's continued commitment to a "strong dollar" policy and denied any intention to intervene in the foreign exchange market, causing the dollar index to rebound. A stronger dollar reduced the attractiveness of dollar-denominated commodities, putting selling pressure on crude oil at its high levels and limiting short-term gains.
From a fundamental perspective, the latest inventory data released by the United States shows a clear divergence. The decline in crude oil inventories indicates a temporary improvement in the supply-demand relationship for crude oil, while the continued accumulation of refined product inventories reflects ongoing pressure on end-user demand.
Data shows that in the week ending January 23, U.S. crude oil inventories, including those in the Strategic Petroleum Reserve, declined slightly, while commercial crude oil inventories, excluding the Strategic Petroleum Reserve, saw a more significant drop, exceeding market expectations.
This change provided real support for oil prices. However, at the same time, both gasoline and distillate fuel inventories increased, with gasoline inventories reaching their highest level since 2020 and distillate fuel inventories also showing a relatively high year-on-year increase.
Furthermore, refinery capacity utilization has declined significantly, indicating that refineries are becoming more cautious given the uncertain outlook for refined product demand. This means that current oil price increases are more dependent on supply-side factors and risk premiums, while improvements on the demand side have not yet been consistently confirmed.
From the daily chart, WTI crude oil is maintaining an overall upward channel in the medium term, with prices breaking through the upper edge of the previous trading range, indicating a significant increase in bullish momentum. On the daily chart, oil prices have effectively risen above multiple key moving averages, with short-term and medium-term moving averages showing a bullish alignment, making the technical pattern quite favorable for the bulls.
In terms of momentum indicators, the daily RSI remains in the strong range, but there has been no extreme overbought signal yet, indicating that the bullish momentum still dominates. However, the room for further upward movement in the short term may gradually narrow, and we need to be wary of increased volatility at high levels.
Observing the volume and price structure, the recent surge in volume followed by a stabilization in trading momentum suggests that the market is awaiting new driving factors. Regarding key price levels, the area around $63 has become a significant short-term support zone. If the price can continue to hold above this level, WTI is expected to continue its upward movement, potentially testing the psychological barrier of $65.
Conversely, if geopolitical risks ease or the US dollar strengthens further, and oil prices fall below $63, they may retest the previous breakout area. Attention should be paid to the effectiveness of the technical support around $61.50.
Overall, the WTI daily chart structure remains bullish, but it has entered a sensitive high-level range. Future price movements will heavily depend on whether geopolitical tensions escalate further and changes in the macroeconomic and financial environment. As long as the trend remains intact, the bulls retain control, but those chasing highs in the short term should be wary of the risk of a pullback.
Editor's Note:
From the current perspective, the rise in oil prices is more due to the rapid return of geopolitical risk premiums than to a substantial shortage in fundamentals. While declining crude oil inventories provide support for prices, the continued rise in gasoline and distillate fuel inventories, coupled with a decline in refinery operating rates, indicates that concerns remain regarding end-user demand.
Against the backdrop of a rebounding US dollar and lingering expectations of oversupply, oil prices may maintain a high level of fluctuation in the short term, with the future direction still highly dependent on the evolution of the situation in the Middle East and changes in the macro-financial environment.
- 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.
