Oil Prices at a Crossroad: Can WTI and Brent Sustain Gains Above $75?

Oil Price Analysis: Can WTI and Brent Sustain Gains or Is a Pullback Coming?

Oil prices have been volatile as geopolitical tensions, supply disruptions, and fluctuating demand forecasts keep traders on edge. West Texas Intermediate (WTI) crude (CL=F) and Brent crude (BZ=F) have both rebounded after recent declines, with WTI hovering near $72.24 per barrel and Brent trading at $76.05 per barrel. However, uncertainty remains high as key supply-side factors—such as U.S. crude inventory builds, renewed Iranian oil flows to China, and potential sanctions relief on Russian exports—continue to shape the market.

U.S. Crude Inventories Surge, Raising Concerns Over Supply Glut

The American Petroleum Institute (API) reported a 3.34 million-barrel increase in U.S. crude oil inventories for the week ending February 14, far exceeding the 2.2 million-barrel build that analysts had expected. This adds to a cumulative rise of nearly 18 million barrels over the past four weeks, including a massive 9 million-barrel build just last week. The steady rise in U.S. stockpiles suggests that demand is not keeping pace with supply, which could limit further gains in oil prices.

Adding to concerns, the Department of Energy (DoE) also reported a 0.2 million-barrel increase in the Strategic Petroleum Reserve (SPR), which remains well below pre-withdrawal levels following the Biden administration's emergency sales. Despite SPR replenishment efforts, commercial crude inventories are swelling, keeping traders cautious about oil's upside potential.

Gasoline inventories also rose by 2.83 million barrels, offsetting the prior week's 2.507 million-barrel decline. Meanwhile, distillate inventories fell by 2.69 million barrels, deepening the already 11% deficit relative to the five-year average. This divergence suggests that while gasoline demand remains stable, refiners are struggling to meet diesel demand, a factor that could support oil prices in the coming weeks.

Geopolitical Risks Drive Market Volatility: Iran, Russia, and Iraq in Focus

Geopolitical uncertainty remains a dominant factor in oil markets, with several key developments influencing sentiment. Iranian crude exports to China have rebounded sharply, averaging 1.74 million barrels per day (bpd) in February, an 86% jump from January after the Biden administration imposed sanctions on Iranian shipping entities late last year. This resurgence in Iranian shipments has eased some supply concerns, but it also raises the risk of heightened U.S. enforcement actions, which could disrupt flows and drive prices higher.

At the same time, Russian crude oil flows remain uncertain as the U.S. considers lifting some sanctions. Talks between Russian and U.S. diplomats in Riyadh have sparked concerns that a potential Ukraine war settlement could involve easing restrictions on Russian exports. Such a move would flood the market with additional supply, potentially capping oil's upside.

Meanwhile, oil production in North Dakota, the third-largest U.S. oil-producing state, is facing disruptions due to frigid weather, with the Pipeline Authority warning of potential declines between 120,000 bpd and 150,000 bpd. This temporary supply constraint has provided a bullish factor supporting WTI prices.

Oil Prices React to OPEC+ Supply Strategy and Demand Outlook

OPEC+ remains a key player in balancing the oil market, with Saudi Arabia and Russia reaffirming their commitment to production cuts. However, some OPEC+ members, including Iraq and the UAE, have signaled interest in raising output if prices remain above $75 per barrel. This has created speculation about potential disagreements within the cartel, which could affect price stability.

Iraq is also negotiating the restart of Kurdish oil exports via Turkey, which have been halted for months due to legal and revenue-sharing disputes. A resolution could add 400,000 bpd of additional supply to global markets as early as next month, pressuring oil prices if demand does not pick up accordingly.

On the demand side, oil traders are closely watching China’s economic recovery, which has been slower than expected despite aggressive stimulus efforts. Recent S&P Global Flash PMI data showed a mixed picture, with signs of weakness in manufacturing that could weigh on crude consumption.

Technical Analysis: WTI and Brent Crude Facing Resistance

The Brent crude oil price is holding above key support and is poised for its third consecutive day of gains, with resistance seen around the 200-day simple moving average (SMA) at $77.15. A break above this level could pave the way for further upside toward $80 per barrel, but failure to hold current levels could lead to a retest of support at $75.57.

For WTI crude, the technical outlook remains mixed. While prices have recovered from recent lows, WTI needs to break above the $73.50-$74.00 resistance zone to signal a stronger bullish reversal. The 55-day SMA at $75.29 remains a critical level for upside confirmation. Conversely, if prices drop below $71.50, bearish momentum could accelerate toward $70 per barrel.

Momentum indicators show a neutral-to-bullish bias, with the Relative Strength Index (RSI) stabilizing near 50, indicating indecision among traders. Meanwhile, the Moving Average Convergence Divergence (MACD) histogram is starting to show signs of weakening upside momentum, suggesting that bulls need stronger catalysts to push prices higher.

Can Oil Hold Above $75 or Is a Reversal Coming?

Oil markets remain finely balanced between bullish and bearish forces. On one hand, ongoing geopolitical risks, OPEC+ production cuts, and supply disruptions from North Dakota are providing support for prices. On the other, surging U.S. crude inventories, increased Iranian exports, and the possibility of sanctions relief on Russian oil are acting as headwinds.

In the short term, much will depend on upcoming U.S. economic data, particularly jobless claims and inflation reports, which could influence Federal Reserve policy and impact crude demand. If recession fears resurface, oil prices could struggle to maintain current levels. However, a strong labor market and robust industrial activity could provide the demand boost needed to keep Brent above $76 and WTI above $72.

With WTI hovering near $72.24 per barrel and Brent trading at $76.05, traders should watch for confirmation of a breakout above resistance levels. If Brent surpasses $77.15, a run toward $80+ is possible. However, failure to hold above key moving averages could trigger a retest of $75 or lower, bringing renewed downside risk.

For now, oil prices remain at a pivotal juncture, with fundamental and technical factors offering mixed signals. The next major move will likely be driven by fresh geopolitical developments, OPEC+ actions, and macroeconomic data. Traders should remain vigilant as volatility continues to shape the market’s direction.

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