West Texas Intermediate oil prices recovered slightly to around $73.50 after a four-week low of $72.19, though upside is limited due to weak signals from the global demand front. China’s manufacturing activity unexpectedly shrank in January as the Purchasing Managers’ Index declined to 49.1. Warmer-than-expected US and European weather will continue to dampen demand for heating fuel. Other risks include US steel, aluminum, and copper tariffs that could have implications for global commodity demand. Analysts warn that these combined factors with US sanctions on Russian oil trade and China’s wary approach to using US-sanctioned tankers may weigh on WTI prices in the near term.
KEY LOOKOUTS
• China’s unexpected contraction in manufacturing PMI at 49.1 raises concerns about crude oil demand.
• Warmer US and European weather might reduce heating fuel demand this week.
• US tariffs on metals might disrupt global commodity demand.
• Sanctions on Russian oil trade and China’s tanker restrictions might add to the shocks on crude oil imports.
West Texas Intermediate (WTI) Oil prices remain capped near $73.50, as the market is burdened by fears of global demand. China’s unexpected contraction in January’s manufacturing PMI, which fell to 49.1, increased doubts about demand for crude from the world’s largest oil importer. Warmer-than-average weather in the US and Europe will once again cut back on demand for heating fuels, adding pressure to the market. Besides, potential US tariffs on metals such as steel, aluminum, and copper could further disrupt global commodity markets, while sanctions on Russian oil trade and China’s tanker restrictions amplify uncertainties in the oil market. These combined factors are likely to keep WTI under pressure in the near term.
WTI oil is trading at nearly $73.50 and facing pressure due to weak Chinese manufacturing data, US warmer weather leading to decreased demand for heating fuels, and pending US tariffs targeting global commodity markets.
•The plunge into 49.1 in January shows decreased demand from the largest crude importer globally
•Above-average temperatures are causing fuel demand to shrink this week.
•Proposed steel, aluminum, and copper tariffs threaten global commodity markets.
• US sanctions on Russian oil trade may further tighten global supply chains.
• The Shandong Port Group’s ban on US-sanctioned tankers adds uncertainty to China’s crude import outlook.
• Broader economic caution and risk-averse sentiment are weighing on oil prices.
• Prices face challenges sustaining above $73.50, reflecting a constrained upside due to tepid demand.
West Texas Intermediate oil prices are trading near $73.50 as they try to gain momentum following a rebound from a four-week low of $72.19. A host of global factors continues to weigh on the outlook for crude demand. China’s manufacturing sector, a key driver of global oil consumption, reported a significant contraction in January, with the PMI dropping to 49.1. This sudden drop has added more fuel to the fire about weak oil imports into the world’s largest crude importer. Adding more fuel to the bearishness, warmer than usual weather is forecasted to happen in the US and Europe which would cut heating fuel demand and push oil prices lower.
WTI Daily Chart
TradingView Prepared by ELLYANA
Market participants continue to be sensitive to the US tariffs on steel, aluminum, and copper as they may eventually affect global commodity markets. US sanctions against Russian oil trading and China’s tankers restricting trading with US-sanctioned vessels are adding additional uncertainties to the global supply chains. Analysts note that all these factors combined with the overall cautious risk environment are going to keep the WTI oil prices under pressure in the near term and offer very little room to upside.
TECHNICAL ANALYSIS
Technical chartists of WTI Oil see the current strong resistance near $73.50. The rebound from the four-week low of $72.19 is seen as significant. The Relative Strength Index is neutral in momentum, which means the market is neither overbought nor oversold. Meanwhile, the 50-day moving average is below the 200-day moving average, indicating a bearish trend in the medium term. A break above the resistance at $73.50 could see the price push to $75, or a break below $72.19 may lead to further downside to $70. Traders should pay attention to volume trend and key support-resistance areas for breakout or reversal signals.
FORECAST
WTI Oil prices are likely to gain limited upside if some positive catalysts materialize. Rebound in Chinese manufacturing activity or supportive economic policies from Beijing can strengthen crude demand from the world’s largest importer. Further, geopolitical tensions affecting supply chains — tighter sanctions on Russian oil or disruptions in other significant crude-exporting regions — could drive prices higher. In the near term, if WTI can manage to move above the $73.50 resistance level, further upside towards $75, or even $77 could be realized.
On the downside, WTI faces a considerable drag from a soft global demand outlook. China’s surprising contraction in its manufacturing sector, paired with warmer than usual weather both in the United States and in Europe, would likely drag down prices for crude oil. If the demand for heating fuels continues to slacken and worries about a worldwide recession increase, WTI should test the pivotal support level at $72.19. Breaks below here could push it lower toward $70, with bullish momentum intensifying if demand does not rebound or another negative economic report occurs.
