Oil Price Analysis: Can WTI and Brent Sustain the Current Rally or Is a Correction Coming?
Oil (WTI & Brent) Prices Surge as Global Supply Risks Intensify
Oil prices have been on an upward trajectory, with West Texas Intermediate (CL=F) trading at $78.45 per barrel and Brent Crude (BZ=F) climbing above $82.10 per barrel. This surge is fueled by a complex mix of factors including OPEC+ production cuts, heightened geopolitical tensions, US sanctions on Iranian crude, and rising global demand expectations. However, as prices push toward multi-month highs, the question remains—can oil sustain this momentum, or is a correction on the horizon?
OPEC+ Production Strategy and Iraq’s Compliance Impact Oil Supply
OPEC+ has reaffirmed its commitment to stabilizing the oil market by enforcing production caps, with Iraq pledging to keep its crude output at 4 million barrels per day (bpd). The country has been a consistent overproducer within the cartel, but it has now committed to deeper cuts to compensate for previous excesses.
Adding to this, the long-awaited resumption of Kurdistan’s crude exports via Turkey’s Ceyhan port could inject 400,000 bpd back into the market, though uncertainties remain regarding how much of this supply will reach global markets. Any delays or disruptions in this flow could further tighten the market and push oil prices higher.
US Sanctions on Iranian Oil and Middle East Geopolitical Risks
The Biden administration has ramped up sanctions on Iran’s “shadow fleet”, targeting over 30 tankers and individuals involved in transporting Iranian crude to China. This move aims to curb Tehran’s oil revenue and could lead to reduced Iranian exports, a factor that could squeeze global supply further.
Former President Donald Trump has vowed to reinstate even stricter sanctions on Iran if he returns to office, which could remove an additional 1-2 million bpd from the market, significantly tightening supply. The market is already pricing in this potential scenario, contributing to the bullish sentiment in crude prices.
US Oil Production Growth and Strategic Reserves Impact
Despite OPEC+ supply constraints, US oil production continues to expand. Chevron (NYSE:CVX) projects its Gulf of Mexico oil output will hit 300,000 bpd by 2026, up from 200,000 bpd in 2024. US shale production, however, has started to slow down, with rig counts declining as companies focus on capital discipline rather than aggressive expansion.
Meanwhile, the US Strategic Petroleum Reserve (SPR) remains at historically low levels, following last year’s emergency releases aimed at curbing inflation. Any moves to refill the SPR could add upward pressure on crude prices by tightening available supply.
Global LNG Market Disruptions and Its Influence on Oil Prices
The surge in natural gas prices—which have doubled in the past year due to reduced inventories and rising demand—has intensified the competition for energy resources. LNG demand remains high in Europe and Asia, with major buyers like China and India negotiating lower prices for Qatari LNG contracts, complicating global supply agreements.
This shift toward more expensive gas is forcing industries to switch to oil-based fuels, particularly in Asia and parts of Europe. If natural gas prices remain elevated throughout 2025, oil demand for industrial use could rise further, adding another layer of support for crude prices.
Oil’s Technical Outlook: Is WTI Headed for $85 or a Pullback?
WTI crude (CL=F) is currently testing key resistance near $80 per barrel, a level that has historically triggered either strong breakouts or sharp reversals. The Relative Strength Index (RSI) is approaching overbought territory, suggesting that while the uptrend is strong, a pullback could be imminent.
If WTI breaks above $80, the next target is $85 per barrel, followed by $88, where major resistance lies. A failure to hold above current levels could see a retracement toward $75, with further downside risk if US production increases unexpectedly.
Brent crude (BZ=F) is showing a similar pattern, with a potential breakout above $83 leading toward $87. However, if demand slows or supply disruptions ease, Brent could fall back to $78-$80 per barrel in the near term.
Will Oil Prices Continue to Rise or Face a Correction?
The trajectory of WTI and Brent will largely depend on the next OPEC+ meeting, geopolitical developments, and US economic data. If sanctions on Iran tighten, production cuts deepen, or global demand accelerates, oil prices could push toward $85-$90 per barrel.
However, if US crude output rises faster than expected, Kurdistan’s exports come online smoothly, or economic growth slows, prices may struggle to hold these gains.
For now, oil remains bullish, but volatility is expected. The next few weeks will be critical in determining whether this rally has more room to run or if a sharp correction is ahead.
