Crude oil is currently testing a resistance trendline at $59 per barrel. If it breaks through this point, it could potentially rise by 50% in the first half of 2026. The oil market is gaining attention as funds are likely to move from metals to oil. In 2025, we saw big increases in gold, silver, platinum, and palladium, while natural gas jumped 100% before stabilizing. Institutional buying is expected to fuel the next rise in oil prices.

Concerns About Oil Oversupply

Worries about oversupply in the oil market are still present, but the U.S. rig count is steadily decreasing. This trend indicates that American producers are cutting back on production. Overall, oil appears to be a strong trading option for the first half of 2026. As crude oil approaches the key $59 per barrel trendline, we should prepare for a potential breakout in early 2026. It’s wise to position ourselves for a rise rather than wait for confirmation, as a clear break could happen quickly. Increased price fluctuations around this level make options strategies appealing for managing risk and taking advantage of a possible jump. A simple strategy is to buy call options with expirations in March or April 2026, allowing time for the trade to develop. Choosing strike prices just above the resistance, like the $60 or $62.50 calls, allows for a straightforward bet on the expected breakout. This approach sets our maximum risk to the premium paid while offering considerable upside potential.

Supply Data and Market Tightness

The case for a breakout is supported by supply data that challenges the oversupply story. The latest Baker Hughes report shows the U.S. rig count falling to 585, its lowest in the fourth quarter of 2025. With fewer active rigs, we expect lower production in the coming months, tightening the market more than many anticipate. Moreover, recent inventory reports suggest that demand is stronger than expected. The Energy Information Administration (EIA) reported a surprising draw of over 3 million barrels last week, indicating that consumption is beginning to outpace bearish supply predictions as we head into the new year. In 2025, there was significant capital movement into metals, with gold exceeding $2,400 and silver nearing the $30 mark. As these trades mature, institutional investors are on the lookout for the next undervalued asset, and oil fits that bill. This situation is reminiscent of the consolidation seen in late 2021 before oil’s major rally in 2022. For a more cautious approach, a bull call spread can lower the initial entry cost. For instance, one might buy the March 2026 $60 call while selling the March 2026 $70 call. This creates a less expensive position that can profit from a price increase, although it limits maximum potential gains. Create your live VT Markets account and start trading now.

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