Crude oil futures closed at $63.96, up by $1.31 or 2.09%. This price falls within the swing area of $63.61 to $65.27. The 100-day moving average sits at $64.73, which is an important level in this range. Earlier this week, prices went below this average and stayed there for the last three trading days.

Key Risk Levels

The moving average and swing area are crucial for assessing short-term risks. If prices move above these levels, it could indicate more upward momentum after the recent decline. Crude oil futures are now within the key swing area of $63.61 to $65.27, making this a key decision point for the market. The first challenge will be whether prices can surpass the 100-day moving average at $64.73. If they fail to do so, we might see downward pressure return. This price increase is backed by recent data from the Energy Information Administration (EIA) that showed an unexpected drop in crude inventories of 3.1 million barrels. Analysts had predicted a small increase, making this larger drop suggest that demand is outstripping supply. This data adds credibility to a potential upward breakout. However, we must consider some bearish signs from abroad, especially with China’s manufacturing PMI for July 2025 falling slightly short of expectations. This raises concerns about future energy consumption in the world’s largest oil-importing country. These worries about global growth are likely preventing prices from rising more sharply.

Market Strategy

Additionally, OPEC+ decided to keep production quotas unchanged during their recent meeting. This disciplined supply management has supported prices, but their choice not to cut further indicates that they are comfortable with prices in the mid-$60s range for now. Traders shouldn’t expect immediate support from OPEC+. Reflecting on the volatile period from 2022 to 2024, when prices fluctuated dramatically from over $120 to the low $70s due to geopolitical events and post-pandemic demand shifts, it’s clear how quickly a breakout from a critical area can lead to significant trends. We need to be ready for bigger moves once this range is breached. Given the tension between positive inventory data and negative demand forecasts, option traders might explore strategies to benefit from a breakout. Setting up straddles or strangles could help take advantage of the anticipated increase in volatility. Alternatively, consider establishing bull call spreads above $65.27 or bear put spreads below $63.61 to manage risk while positioning for a directional move. Create your live VT Markets account and start trading now.

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