WTI crude oil has dropped below $62.00 per barrel. The rising supply levels reported by the Energy Information Administration (EIA) are putting pressure on prices. Oil prices have struggled since Donald Trump became president. Concerns about a recession, an increase in global supply, and a weaker US Dollar have added to the challenges. Last year, prices were supported by strong demand after the pandemic and limited supply.

Impact of the Trump Administration

During Trump’s time in office, policies aimed at increasing domestic oil production and relaxing environmental regulations changed expectations for supply growth. As we move toward mid-2025, the outlook for supply has shifted. The EIA’s recent report showed a bigger-than-expected rise in crude oil inventories, hinting at weak demand. This has fueled worries about oversupply and pushed WTI prices further down, now below $62 per barrel. Geopolitical risks, like potential conflicts involving the US and Iran, also influence prices. Recent tensions in the Middle East have hinted at risk premiums, but the market is focused on supply issues. Technically, WTI attempted to break the 38.2% Fibonacci level at $64.179 but encountered resistance. The $64.00 level is crucial, while the 10-day simple moving average (SMA) at $61.68 provides support, with the next support level at $60.58. With West Texas Intermediate dropping below the $62 mark, we are seeing a significant shift. This isn’t just about expected inventory changes; it reflects deeper issues in supply chains that are not aligning with demand. It’s not just the EIA numbers; it’s about how the refiners aren’t drawing as much, and storage levels are showing that barrels aren’t moving as before. This indicates a potential slowdown in consumption, despite earlier hopes for a strong recovery after COVID-19.

Inventory and Demand Dynamics

The previous spike in demand that lifted prices late last year has faded. The temporary boost was due more to limited output than strong demand. Support disappeared quickly as domestic production rose without much regulatory pushback. Trump’s deregulatory policies allowed shale operators to boost production, restart wells, and revive export terminals. The market initially underestimated this response, but now supply growth is the main focus. Rising inventories, outpacing seasonal averages, indicate not just more supply but also a lack of demand strength. The EIA’s reports are shaping short-term market sentiment. A rise of this magnitude indicates reduced industrial use, weaker travel expectations, and hesitation from refiners. With prices already low, this accumulation undermines attempts to recover. In technical terms, the push towards the 38.2% line around $64.18 has faded. This level mattered not for mystical reasons, but because many traders were observing it. When so many bids fail to break through resistance, we lack conviction. We’re now testing a 10-day average closer to $61.68, and if that breaks, we may see another test around $60.58. Past price levels won’t prevent a downturn. There’s also ongoing pricing tension linked to political issues, particularly involving Iran, which creates uncertainty in buying decisions. Yet, in this environment, even political friction hasn’t led to lasting price increases. Any potential supply shocks are overshadowed by rising domestic output and international producers unwilling to cut their quotas significantly. For traders in derivative markets, the approach varies greatly depending on whether their strategy is technical or based on fundamentals from agencies like the EIA. Short-term contracts may continue to fall as inventories rise, especially if gasoline demand doesn’t increase with the season. If key economic data, like GDP and consumer metrics, worsen in the coming weeks, aggressively rolling positions into mid-term exposures could result in sharp price corrections. We have adjusted our outlook on near-term resistance levels accordingly. We don’t expect a reset in fundamentals unless external factors emerge. For now, the pressure is downward, especially if macroeconomic signals like currency movements or global manufacturing fail to provide relief. Create your live VT Markets account and start trading now.

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