FX.co ★ Proof | GBP/JPY

Crude oil prices saw a slight upward correction on Tuesday, climbing for the second consecutive day, but remained below the $62-per-barrel low reached last week. The recent rebound is seen by many as a temporary respite after a more than 5% decline over the previous three trading days, as the fundamental picture for the commodity remains mixed. The primary source of support for crude oil prices came from a recent OPEC+ decision to slow the pace of production increases beginning in October. While the decision to increase supply is inherently bearish, the fact that the increase is smaller than in previous months provided a measure of relief to a market that was bracing for a significant oversupply. However, this optimism was quickly tempered by Saudi Arabias decision to cut oil prices for its buyers in Asia, a move widely interpreted as a response to weakening demand in the region. This action by the worlds top oil exporter renewed concerns about the health of the global crude oil market. The International Energy Agency (IEA) has also downgraded its global oil demand growth forecast for 2025, and the US Energy Information Administration (EIA) forecasts significant inventory builds in the coming months, which will put downward pressure on prices. The combination of slowing global trade and a weak economic outlook for major economies, particularly in Asia, points to a near-term decline in energy demand. This reality is dampening any enthusiasm that might have been generated by OPEC+s modest production increase. From a technical standpoint, the 4-hour Relative Strength Index (RSI) for crude oil remains in bearish territory, while the Moving Average Convergence Divergence (MACD) is showing a tentative recovery. This mixed picture reflects the current indecisive market sentiment. For the upward correction to gain traction, crude oil prices need to break above the $63.30 level, which represents the September 4 high. A break above this level would confirm a deeper recovery and could set the stage for a move toward the September 2 high of $65.65. A decisive move above $63.30 would also trigger a "double bottom" pattern in the $61.20-61.30 area, with a technical target near the July high of $70.00. On the downside, a renewed bearish reaction will bring the $61.20 level (the September 5 low) back into focus. A break below this level would expose the psychological $60.00 mark, followed by the May 30 low of $59.50. In conclusion, while crude oil prices have shown a slight rebound, the market remains fragile. The tug-of-war between the modest OPEC+ supply increase and the growing evidence of weak global demand, particularly in Asia, will likely keep prices volatile. The upcoming US crude oil inventories report will be a key factor in determining the next move for the commodity.