Supply And Demand Outlook
The IEA said it plans to release about 400 million barrels from members’ strategic reserves. It also cut its 2026 global oil demand growth forecast to 640,000 barrels per day from 850,000 bpd. On charts, WTI moved above the 21, 50 and 100-day SMAs, while RSI stood near 81 and ADX moved towards the high-40s; ATR rose. Resistance sits near $94.61 (50% retracement from $113.28 to $75.95), then $99.02 and $105.29, with $113.28 above; support is near $90.21, $84.76, $75.95, and the 21-day SMA near $72.20. We are still navigating the aftershocks of the extreme volatility seen in 2025 when the US-Iran conflict caused massive price swings and the temporary closure of the Strait of Hormuz. The memory of WTI crude surging to $113 before collapsing is keeping the market on edge, even with prices now more stable around $82.50. This history suggests traders should be prepared for sudden, headline-driven moves in the coming weeks. The wild price action of last year has left implied volatility at elevated levels, making options premiums relatively expensive. Currently, the CBOE Crude Oil Volatility Index (OVX) is hovering near 35, far below the crisis peaks but still above historical norms, reflecting lingering geopolitical risk. This environment makes strategies that benefit from high volatility, such as straddles or strangles, attractive for those anticipating another major price swing.Key Market Levels
Last year’s 400-million-barrel release from IEA strategic reserves has left global stockpiles in a more vulnerable position heading into the spring season. While U.S. crude oil production has remained robust at approximately 13.3 million barrels per day, it may not be enough to cushion the market from another significant supply disruption. Therefore, any renewed tension in the Middle East could have an outsized impact on prices, making long call options a viable hedge against a supply shock. The IEA’s forecast from 2025, which lowered its 2026 demand growth projection, appears to be accurate as we see signs of a slowing global economy. Recent Purchasing Managers’ Index (PMI) data from major economies has shown a contraction in manufacturing activity, weighing on the overall demand outlook for energy. This persistent demand weakness could cap any potential price rallies, suggesting that bear call spreads might be an effective way to trade a range-bound or slightly bearish market. We are closely watching the key Fibonacci levels that defined the trading range during the 2025 crisis, particularly the support around the $76 mark and resistance near $90. A decisive break below support could signal that demand fears are taking over, creating an opportunity for traders to initiate short positions or buy puts. Conversely, a sustained move above the $90 resistance level would suggest supply fears are returning, likely prompting a rapid move higher. Create your live VT Markets account and start trading now.
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