Crude Under Pressure

Crude futures are turning heavily lower this week and are now fast approaching a fresh test of the YTD lows. The rally in USD is putting clear downside pressure on crude prices, driven by fresh trade fears between the US and China, as well as the easing of supply risks linked to the Israel-Gaza ceasefire. USD has surged higher again this week on the back of fresh tariff threats from Trump against China. The prospect of a return to all-out trade ware between the US and China after several months of reduced tariffs is a bad signal for global trade and crude demand. This comes on the back of both the EIA and the IEA warning of an impending oversupply glut to hit the market and take prices lower over the next year.

Israel-Gaza Peace Deal

News of the cessation of Israeli military actions against Gaza is adding to bearish pressure on crude this week. The precarious situation there and the risk of broader Middel East violence had been a key upside driver for crude prices over the last year. However, with the conflict over for now, these supply risks are deemed to be weaker which should keep crude prices turned lower near-term.

USD Strength

Finally, continued upside in USD this week is also keeping pressure on commodities prices. Fresh trade fears are feeding into stronger demand for USD amidst a weakening of risk assets. While rhetoric between the US and China remains hostile, this dynamic looks likely to continue near-term.

Technical Views

Crude

The market is close to testing the 57.41 support level, just above the YTD lows. With momentum studies bearish, risks are pointed towards a fresh break lower which, if seen, will turn focus to 53.90 as next support to note. Topside, the bear trend line and 63.83 level is the key area for bulls to breach in order to alleviate downside risks.